Proven selling Access shares pending JMMB offer
Published:Wednesday | September 25, 2019 | 12:09 AMSteven Jackson/ - Senior Business Reporter
Private equity firm Proven Investments Limited will sell at least half its stake in Access Financial Services to finance acquisition of more shares in JMMB Group during its pending offer to the public, the Financial Gleaner understands.
Failure to participate in the JMMB offer could result in a dilution of Proven’s holdings in the financial conglomerate.
“We think Access has more upside, but we have to maintain our existing percentage ownership in another investment,” Proven CEO Chris Williams told the Financial Gleaner without directly naming JMMB Group. The issue is to be discussed with Proven’s board, he said.
Proven’s stake in Access has grown more than fourfold to $5.5 billion since making the $1.2-billion investment in the microfinancing firm in 2014. Its stake in JMMB Group has increased about a third to $15 billion since that acquisition last December.
Proven holds 20 per cent of JMMB Group and a lesser stake could result in the private equity firm having to adopt a new accounting treatment of the investment. It would have to account for the swings in the JMMB stock price on its books -- albeit positive to date -- rather than its current method of booking the profits and dividends.
JMMB Group shareholders last week approved the issue of 325 million new shares, which the financial conglomerate plans to offer to the market, pending regulatory approvals, later this year.
The pricing of the shares is still to be disclosed, but based on Financial Gleaner estimates -- even at a discount of 20 per cent to the JMMBGL current stock price -- Proven would need to inject an additional $2 billion to keep its stake undiluted in JMMB Group, assuming full take-up of the offer.
Proven’s disposal of Access shares would provide sufficient funds to cover that amount. On the weekend, Proven announced an offer to sell down its stake in Access at a discounted price of $32 per share, even as the stock was trading at $40.
The offer, which opens on Thursday and closes on October 11, is aimed at generating at least $2.2 billion in cash from the divestment of half of Proven’s Access shares, or 68.6 million of 136.5 million units. However, Proven may choose to upsize the offer to three-quarters of its holdings, which would generate $3.3 billion. NCB Capital Markets will act as the lead broker and underwriter to the deal.
The shares in Access could easily have been sold as a block to another securities deal or fund. Williams said Proven chose to go to the wider market with the offer to allow more investors to have access to the microfinancing company founded by Marcus James.
“It helps to strengthen the stock long term, which will benefit our remaining holdings,” Williams said. Proven will retain at most 24.7 per cent of its holding in Access, or just about 12.2 per cent if the offer is upsized. It currently holds 49.7 per cent as the single largest shareholder.
Access Financial, which has holdings in Jamaica and the United States, continues to earn record revenue becoming of acquisitions and core loan growth, but its bottom line has been impacted by competition and efficiency issues.
The company maintains a positive outlook, but was silent on growth forecasts, at its annual general meeting this month. On the other hand, JMMB Group executives last week revealed projection of 238 per cent growth in earnings over the next three years, due to its 22 per cent acquisition of shares in Sagicor Financial. The pending JMMB Group share sale is meant to finance the Sagicor acquisition.
Proven acquired a 20 per cent stake in JMMB for $9.2 billion, or about $28.26 per share, last December. The stock is now trading at $46 per share, increasing the value of Proven’s holdings to $15 billion.