Lumber Depot Limited, a company newly created by Blue Power Limited which wants to sell its lumber division, is promising buying shareholders that the construction industry in Jamaica is on the upswing and likely to remain in that mode, making the investment a profitable one for those who subscribe.
It newly issued prospectus that the new entity in which shares are being offered to the public is running a 21 year old business which has s good relationships with many suppliers.
Directors say in the prospectus, “this good relationship is expected to continue with the Company as the personnel managing these relationships have not changed. The Hardware Business increased its sales by an average of just over 12 per cent per annum during the preceding 5-year period.”
Lumber Depot also notes that the operation has maintained its gross margin of between 17 per cent and 17.5 per cent. Net profits for the Hardware Business have varied between 3.4 per cent and 6.4 per cent depending to some extent on the allocation of expenses to the Hardware Business prior to the reconstruction.
Antibes Holding Company Limited, the major shareholder in Blue Power Limited is selling its shareholding to the public and also to other parties in a move that is targeted at the listing of lumber subsidiary Lumber Depot as a separate company on the Junior Market of the Jamaica Stock Exchange.
Lumber Depot is offering 141, 247,500 share units to reserved clients and the general public via IPO, but it is also engaged in transactions which will see several other parties acquire shares on listing day, should the company be successful in its quest to list on the Junior Market of the Jamaica Stock Exchange.
Units are being offered at $1.20 each to all parties. $169.5 million expected from the IPO itself. Applicants from the general public must request a minimum of 5,000 Invitation Shares and additional increments of 1,000.
The offer to the public will open on Friday 22 November 2019 and close on November 2019. Listing Broker and sole selling agent is Mayberry Investments Limited.
The Company was incorporated on 30 July 2019 but its Hardware Business in the Jamaican building supplies sector commenced over 20 years ago as a division of Blue Power.
As a result of the transfer of the Hardware Business from Blue Power to the Company with effect from 1 November 2019, the Company now owns and controls the 21-year old Hardware Business. Directors are betting on continued improvement in construction and infrastructure developments in Jamaica to drive business.
“This good relationship is expected to continue with the Company as the personnel managing these relationships have not changed. The Hardware Business increased its sales by an average of just over 12 per cent per annum during the preceding 5-year period.”– Blue Power
The Company conducts its principal trading operations for a full range of construction materials, hardware, plumbing and electrical fixtures at 17c Gordon Town Road in Papine, St Andrew.
Lumber Depot owns, operates and controls the Hardware Business which generated approximately $1.2 billion in sales during the 12-month period ending 30 April 2019.
“The vast majority of customers are small contractors or owners of homes and commercial buildings.”– Blue Power Jamaica
The IPO and other transactions are being pursued to settle obligations to the selling shareholder in Blue Power Limited.
The prospectus indicates that assets transferred an Intragroup Reconstruction Agreement with Blue Power dated 1 August 2019 have a book value of $269,941,501.66.
Lumber Depot, in consideration for such assets the Company agreed to assume all the liabilities of the Hardware Business –some $133 million – and pay to Blue Power the excess of assets over liabilities -$111.9 million on 31, 2020 and the balance of $25 million by way of a promissory note for a term of 15 months and bearing interest at a rate of at 6.5% per annum, with no penalty for early repayment.
The Exiting Shareholder (Antibes) has entered into a Share Sale and Purchase Agreement with Blue Power Group Limited, 109,789,250 units of Lumber Depot shares at a price of $1.20. The transfer will be effected as at the Listing Date.
The Exiting Shareholder has also agreed to sell a further 1,200,000 units of Lumber Depot shares at a price of $1.20, if these units are not taken up by certain Blue Power Shareholders.
Other transactions are being pursued with Kenneth Benjamin to whom has been offered l 17 million units of Lumber Depot shares; JN Fund Managers Limited and/or Nominees which has been offered 80 million units; Mayberry Investments Limited to which has been offered 70,618,750 units shares; and Sheila Benjamin McNeill to whom has been offered one million shares. Share price in all transactions is $1.20 per unit and transfer will be effected on listing day.
The company operates from its Gordon Town address with purpose-built warehousing, loading bays, retail space and office facilities. The Company also operates an off-site overflow storage facility at 4 Victoria Avenue, in Kingston.
The company outlines that approximately 70 per cent of the Hardware Business sales consist of cement, steel, lumber and paints while the other 30 per cent comprise a large number of items including plumbing and electrical supplies.
The prospectus indicates, “The vast majority of customers are small contractors or owners of homes and commercial buildings.”
Most of the supplies are obtained locally from established companies such as Caribbean Cement Co. Ltd, Tankweld Metals and Berger Paints. Ply board, treated lumber and a few basic items are imported by the Hardware Business when the competitive situation warrants.