Musson Subsidiary (PBS) Launches IPO To Raise A Whopping US$41.5m

The Productive Business Solutions (a subsidiary of the Musson group of companies) has launched its initial public offer to raise US$41.5m. These are some highlights of the offer.

  • The company is incorporated in Barbados and intends to have a secondary listing on the Barbados Stock Exchange
  • The application will be open for subscription on July 5, 2017 and close on July 26, if it’s not oversubscribed on its opening date (based on what I’ve seen in IPOs)

The Business and what they do

  • The company distributes printing, computing, networking, storage, imaging, security and point of sale equipment products and provides document management, graphic communication, software integration, outsourcing and more to clients across the region
    • They have exclusive distribution rights for Xerox in 14 countries, making it the largest distributor of Xerox in the region. They also maintain distributional relationships with other brands including Cisco, Oracle, HP etc.
    • In 2017 they got a (non-exclusive) contract to distribute Xerox to Colombia, a country with a population of over 49 million people. The GDP of Columbia is similar to the GDP of the other 14 countries in which they already distribute combined.
    • They were also granted exclusive rights to distribute in Suriname.
  • The Company’s ultimate parent company is Musson (Jamaica) Limited, which is a company incorporated and domiciled in Jamaica, and the Company’s controlling parties are Musson and Paul B. Scott.

 

How They Make Money

The Company segregates its revenues in two main categories: Equipment Sales and Recurring Sales.

  • Equipment Sales include both hardware and software, and the primary brands are Xerox, Oracle, Cisco, L3, NCR, and HP.
  • Recurring Sales is further subdivided into two categories, paper and supplies and maintenance and servicing.
    • Paper and Supplies include the sale of parts for the equipment, rental/leases of equipment, phone/ID/access cards, while
    • Maintenance and Servicing include maintenance and maintenance contracts for the equipment, printing of statements, and other services as described in the below table.

Without even digging down into the figures you can see that the company is well diversified both in terms of where it makes its money (countries) and what products contributes (product line). That’s definitely a plus. 

The Offer

The company intends to raise

  • US$21.5m from the sale of 39.1m common shares at US$0.55 per share
  • They also intend to sell 25.8m 9.75% J$ Redeemable Cumulative Preference shares at $100 per share
    • US$8.7m is to be paid to the International Finance Corporation (IFC)
  • FirstCaribbean and NCB Capital Markets are the brokers arranging this issue
  • 27.3m common shares or 69.7% of the offer is reserved for Portland, as they ‘are sophisticated investors with access to significant funding which will increase the likelihood of success of the IPO’… the prospectus states
  • After the offer
    • the Facey group’s ownership will be diluted down to 68.3% from 84.2%,
    • The Portland related companies will own over 20%, and
    • the general public will juggle just about 4% (3.7% actually).

 

Company Background

PBS was originally founded in 2001 as a division of Musson to acquire the business and assets of Xerox Corporation in Jamaica. Through a joint venture between Musson and Seprod Limited (“Seprod”), PBS expanded to the Dominican Republic, Aruba and Curacao in 2004 through the acquisition of subsidiaries of Xerox Corporation in those countries. These companies were renamed PBS Dominicana, PBS Aruba and PBS Curacao respectively, upon acquisition by PBS.

The company’s background continues with a similar string of acquisitions.

In 2006 Facey Commodity Company Limited (“Facey”), a then 50% associate company of Musson, acquired 51% of Grupo Difoto, the exclusive distributor of Xerox products in Guatemala, El Salvador, Costa Rica and Panama and a distributor for NCR and Sony Medical imaging in Guatemala. In 2006, Facey also acquired Springer Clarke Business Machines Ltd., owner of Barbados Business Machines Limited (“BBM”), a technology distributor in Barbados that represented Xerox among other brands.

The Company has a subsidiary in Jamaica, PBS Jamaica, along with several other subsidiaries in Central America and the Caribbean. The Company has not itself established a place of business in Jamaica.

More to come. Full prospectus here (PDF)

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  • schnitter

    Is the current price of US$.55 per common share a correct validation for PBS. I was discussing this IPO with a friend who was more incline with basic accounting and he was saying this price was too high for the small amount of common share offered to the public. I personally feel its too expensive but I would like to know someone else opinion. Do you believe that PBS current financial statement, management team and market share validates its current price.