Paul Scott, CEO and Chairman of the Musson Group of Companies

Paul Scott, CEO and Chairman of the Musson Group of Companies with subsidiaries in Ireland, Miami, South America and the Caribbean is very close to securing a reported 60% stake in Jamaica Citrus Growers Limited, the makers of Juciful fruit juices, from The Jamaica Citrus Growers Association (JCGA).

The reported price tag of J$500 million, on the table, is in exchange for a 60% stake in the company, down from a reported 90% when negotiations started over a year ago. But the JCGA has made a counter-offer, which chairman John Thompson has reportedly declined to disclose. Those in the know however are of the view that Thompsons negotiating position is a very weak one as he and the board have very few options and takers for the cash strapped entity.

But Paul Scott is reportedly not the only one with an eye on the Juciful brand. Steven Whittingham, chief executive officer of Island Ice and Beverage Company Limited is also seeking to have a go at the company.

Whittingham, a private-equity investor acquired Kingston Ice two years ago and merged it with Beverage Company Limited to form Island Ice and may see the acquisition of Jamaica Citrus Growers Limited as a vertically integrated fit into his company.

There is also talk of Whittingham putting together a consortium of business units for listing on the junior stock exchange, where companies qualify for full tax exemption on profits for the first five years after listing, and thereafter, tax on 50 per cent of profits for an additional five years.

Whittingham, speaking recently at the inaugural Stocks and Securities Limited’s investor’s forum gave what many consider to be an insight into his investment strategy and thinking.

Steven Whittingham, chief executive officer of Island Ice and Beverage Company Limited

“…….The other thing I would say, why I think it is a good idea to invest in private companies, is that it is a customizable hybrid asset and that simply means that you can do whatever you want with that investment – you can tailor it anyway you like, if you take a look at returns of private-equity companies or venture capital, they have done extraordinarily well and they have generated a lot of wealth for the people who have taken the leap and taken the risk of investing in these types of ventures,” he said.

The JCGA was forced into negotiations with private investors as the Dr. Christopher Tufton  led minister of agriculture and fisheries, following an audit of the financial position, backed away from any further funding and support,  insisting that the company undergo major restructuring, including engaging an equity partner or be placed in receivership.

“The situation was not tenable,” said Tufton. “Their debt-to-asset ratio is bad, as the debt is close to outweighing their assets. But the problem they have had is management, which is fundamental to any business. Where they have lost their way is that the growers, for some reason, have not been holding the management of the entity accountable for the assets that they own collectively. This means that they still have the oranges, they still have a piece of the pie rather than running the risk of losing everything,” Tufton said.

A key component of the restricting and the injection of private equity will therefore be a dramatic change in how the company is run and managed.  Dr. Tufton is reported to have said recently that, “Although having a membership of almost 5,000, the leadership of the association tends to have a lot of influence and control over the direction of the organization, oftentimes with limited input from the general membership,”.

Minister of Agriculture and Lands, Dr Christopher Tufton

It is felt by many close to the company that this has been at the heart of the financial and economic problems and only a change in this will bring about a change in the financial fortunes in the company.

If Paul Scott or Steven Whittingham do get their way and secure a majority stake in the company, then radical changes to the board and management are likely to take place, which has a number of the board members worried. Having enjoyed a very liberal approach to the running of the company over many years, they are not too eager to see this come to end any time soon.

In 2008 the JCGA reported that revenue estimates from the plastic-packaged drinks was just over $103 million or 15 per cent of the company’s $689-million revenue at the time. The JCGA’s operation, which is located in Bog Walk, St. Catherine, Jamaica has a capacity to process 1.5 million boxes of citrus annually, with an annual turnover of between $600 million and $700 million.

The company was incorporated in December 1949 as part of a gift from the Canadian government to the Jamaican citrus farmers, represented by The Jamaica Citrus Growers Association (JCGA). Arising from this the JCGA’s ownership is held by an entity called Citrus Growers Associate Limited, which has 3,274,986 shares of a total 3.275 million shares in issue. The other 14 shares are held by 14 individuals, including Tomlinson who became a director in December 1995.

Businessuite is reliably informed that Trade Winds’ boss Peter McConnell also owns one (1) share and sits on the board. Trade Winds Citrus Limited, are makers of Tru Juice the main competitor to Juciful and is located next to The JCGA’s operation in Bog Walk, St. Catherine.

Jamaica Citrus and Trade Winds together buy fresh produce from some 5,000 local farmers.

Last year McConnell was reportedly peeved that, instead of purchasing the fruit from local farmers, some in the beverage sector are importing from South America, and even as far away as Russia. Refusing to name the competitor targeted by his buy Jamaica ad campaign at the time, he said, “their product is made in Belize and imported from Belize frozen. It’s coming from Belize, pre-packaged in Belize.”

National Meats and Foods principal, David Phillips is a major importer and distributor of frozen juices from Belize.

Jamaica Citrus Growers Limited has been engaged in the business of processing, packing and marketing of citrus products since 1951 and chilled beverages since 1962 and has about 100 permanent employees employing an additional 100 during crop season.

Related story

Tufton requests management audit of Citrus Growers Association

Friday, February 08, 2008

MINISTER of Agriculture and Lands, Dr Christopher Tufton has requested a management audit into the operations of the Citrus Growers Association and its subsidiary, Jamaica Citrus Growers Limited, before considering their request for a $70- million loan from the ministry.

Dr Tufton made the decision following complaints from citrus farmers about a $14 million debt owed to them by the association from last June, as well as confirmation from the ministry that it is owed over $50 million by the association, as well.

He said that the sector was facing some serious financial challenges, and his ministry’s position is that it is not prepared to commit any further loans until it is satisfied that the management is efficient.

Over 5,000 citrus farmers are effected by the stand-off between the minister and the association, but Tufton told the Observer recently that he has been meeting with local importers of citrus concentrate in an effort to convince them to buy off the current, local crop.

“What I did, the management (of the Citrus Growers Association) met with me and I said to them, ‘we can’t just keep pumping money into the organization without some form of reassurance that the money is being spent in a manner that it can be repaid and the organization can sustain itself,” he said.

“So our position is that, for the loan to be given, we would want to send in a management team and auditor to look at the whole management process to make sure that it is being managed efficiently,” he added.

The minister explained that the outstanding loan from the ministry is not being serviced and that the repayment period has been delayed twice. The association also owes the Development Bank of Jamaica, but it could not be ascertained what is the situation with that loan.

“The oranges are in the fields and reaping should start within another couple of weeks, and there is uncertainty as to whether or not those oranges are going to be reaped because the association is unable to compensate for the fruits,” Dr Tufton said.

He stated that the farmers stood to lose a lot of money in the current situation but that, in the meantime, he has been meeting with the importers of citrus concentrate to try and use moral persuasion to convince them to purchase the excess local production.

Dr Tufton’s decision followed a lengthy meeting with stakeholders in the sector at his ministry last month. The meeting was called to discuss a request from the Citrus Growers Association for an additional $70 million loan to purchase the current citrus crop from the farmers.

The Observer understands that the farmers are demanding upfront payment from the association, in light of the fact that they are already owed some $14 million from last year’s crop.

Tufton confirmed that the ministry has had “numerous complaints” from the citrus farmers about the debt to them, as well as about the operations of the association and its factory.

He said that the livelihood of 5,300 farmers was threatened by the situation but he felt optimistic that the importers would heed his request and, at least, purchase some of the crop.

“As long as the price and other business arrangements are right, it is in our best interest to support our farmers,” the minister said.

He said that his ministry would continue to work with the association and the processors to ensure that the interest of the farmers is protected.

Jamaica imported 1.5 million liters of citrus concentrate last year.

The Jamaica Citrus Growers Limited, a limited liability company since 1949, is engaged in the business of processing, packing and marketing of citrus and dairy products as well as chilled beverages under the Dairy Farmers and Juciful brand names. It is a subsidiary of Citrus Growers Association Limited (CGA).

The citrus industry has been severely affected, in recent years, by diseases, including the tristeza virus which almost wiped out the industry and has caused a sharp downturn in production.

http://m.jamaicaobserver.com/news/132272_Tufton-requests-management-audit-of-Citrus-Growers-Association