Derrimon to consider APO at annual general meeting
Derrimon Trading Company Limited (DTL) will consider raising fresh capital which would grow the company beyond its current $1.5 billion net worth.
On Monday, Derrimon advised that at the upcoming annual general meeting on August 31, the board will consider recommending to shareholders certain resolutions to facilitate raising additional equity in the company, which operates a series of islandwide supermarkets and also holds equity in fragrance company Caribbean Flavours and Fragrances Ltd.
The group faced criticism among some investors for its higher debt than equity. Consequently, the issue of new capital would result in lowering the $1.7 billion debt to $1.5 billion equity ratio of the group. High debt levels can lead to a high cost of borrowing which in turn can reduce the earnings per share for investors.
The additional public offering (APO) would result in the issuance of new shares to complement the existing 2.7 billion units listed on the Jamaica Stock Exchange. Normally, companies vote initially to increase the authorised share capital and then issue a portion of these new shares to the public at a set price. The price would be issued at a discount to the current trading price of $2.70, in order to offset any dilution of the new shares.