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.
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