Closing date extended until further notice

The initial public offer (IPO) of some 1.25 billion shares in Alliance Financial Services Limited remains suspended.

The suspension, which was imposed on December 28, 2020, the very day the IPO was to have opened, was suspended until today, January 28, 2021. However, the company has announced that the suspension remains in effect.

In a terse statement yesterday (January 27) Alliance Financial Services reported that, “further to the notice issued by the selling shareholders on December 28, 2020, the offer will remain suspended and the closing date extended until further notice. We apologise for any inconvenience this may cause and thank you for your continued interest”.

The selling shareholders are the founders of the financial services outfit, Robert and Peter Chin. After the publication of the IPO prospectus on December 21, 2020, the directors of the selling shareholders were made aware of a matter relating to a separate entity in which they are connected parties.

Consequently, “the selling shareholders have deemed it prudent to suspend the offer until January 28, 2021”.

Alliance Finance Services wants to raise $2 billion in its IPO for 1,252,294,335 shares at the price of $1.59 per share.

Alliance Financial, which was founded 24 years ago by Robert and Peter Chin, acts as a primary agent for remittance provider MoneyGram, operates a cambio and provides payment services as a principal member of the MasterCard network.

IPO would reduce the Chin’s holdings to about 70%

The IPO, which would see the company being listed and traded on the main market of the Jamaica Stock Exchange, would reduce the holdings of the Chins, who will sell down their stake from 88 per cent to roughly 70 per cent. According to the prospectus, “the selling shareholders expect to receive the amount of $1.99 billion pursuant to this invitation. If, however, the invitation does not raise a minimum of $1.5 billion within 40 days after the publication of this prospectus, the application for listing will not be made and all payments for the shares received from applicants will be returned”.

The offer will sell 1.25 billion units at $1.59 per share, with 500 million allotted to the general public; 344 million reserved for Alliance Financial’s key partners; 375.7 million set aside for the lead broker and 31.3 million in reserved shares for Alliance’s Financial’s employees.

Currently, there are 6.2 billion shares held mostly by the Chins directly and through their companies. Melwood Holding, directed and controlled by Peter Chin, who owns 2.8 billion units or just under 50 per cent, while Robert Chin, who controls and directs Willo Capital, owns another 2.8 billion units through that company.

The Chins own another 900 share units directly, split evenly between them. At close of the share invitation, assuming full allocation, the total issued shares would remain at 6.26 billion units with the selling shareholders decreasing their holdings to 2.19 billion or 34.9 per cent for Melwood Holding and 2.19 billion or 34.9 per cent for Willo Capital.

In its prospectus, Alliance Financial has outlined growth strategies, including the company expanding digital solutions for its MasterCard services, while also beefing up its remittance subagent network for MoneyGram. On the cambio side, Alliance Financial is looking to buy other cambio businesses to expand its footprint, not limiting to possible acquisition strategies in the retail cambio space.

In outlining the cambio-specific expansion plans after the IPO, Alliance stated that as the softening of the cambio market persists into 2021, it believes that there may be opportunities available to strengthen and expand its presence in the retail/branch market in preparation for the rebound of the cambio market when tourism activities return to normalcy.

Company growth slowed in 2020

For its 2020 financial year, which ended last September, Alliance Financial growth showed a slight dip in revenues and profit for the year, due in part to the impact of COVID-19 on the economy. Specifically, revenues totalled $1.46 billion in 2020, down from $1.67 billion a year earlier, but up from $1.2 billion in 2016.

Profit after tax fell to $709.3 million from $782.7 million in 2019 and $291.9 million in 2016. Assets grew to $4.4 billion from $3 billion in 2019 and roughly $2 billion in 2016. Shareholder’s equity increased to $1.6 billion in 2020 from $1.5 billion in 2019 and just under $430 million in 2016.

According to the prospectus, “the reduction in overall revenue was directly related to the impact of the COVID-19 pandemic which adversely affected the company’s business for the second half of the 2020 financial year, due to the significant downturn in tourism. This resulted in a decline in the company’s cambio operations in financial year 2020 compared to 2019.

However, the company’s remittance business continues to surpass expectations despite the effects of the COVID-19 pandemic. This validates Alliance Financials diversified business model and demonstrates the resilience of both segments of the company’s business,” explained management.

In April, Alliance Financial launched its remittance ‘direct to card’ MasterCard product, which remotely puts remittance cash on cards.