The Montego Bay-based micro-finance and Cambio operations of Dolla Financial Services have been sold to First Rock Capital for an undisclosed sum.
The multi-million dollar transaction will see First Rock not just acquiring Dolla Financial local operations but also its Guyana subsidiary of Dolla Guyana Limited. This acquisition, which is to close in 21-days represent First Rock Capital’s first private equity investment and its first major investment since its listing on the Jamaica Stock Exchange following its successful Initial Public Offer (IPO) of shares last month.
First Rock moving into Guyana
First Rock will use its acquisition of Dolla Guyana Limited, as its foray into the Guyanese market, which is estimated to see economic growth of 86% this year, the biggest growth projected for any country in 2020. Based on recent financial data, the six-year-old Dolla Financial is a profitable company, which has a loan portfolio of around $300-million with seven branches spread mostly across rural Jamaica and over 1,500 clients.
Based on Dolla’s latest financial results, First Rock is looking at a return on equity of about 25%, according to First Rock President and co-founder, Ryan Reid. This, he declared represents real profits.
First Rock not moving into micro-finance
First Rock, which is based in Jamaican and is in the business of private equity and real estate development, will not be going into micro-financing as a result of the acquisition. Reid emphasised that First Rock’s primary focus will remain private equity financing and residential development.
But he conceded that First Rock has merely executed private equity transaction with a company that happens to be in the business of microfinance, arguing that the company sees value in this private equity transaction with Dolla Financial. The First Rock boss made the point that the acquisition of Dolla Financial will give diversification and balance to the company’s business model.
With the sale of Dolla Financial to First Rock, it is now clear that the planned IPO announced three years ago by its founder and CEO, Kadeen Mairs to grow the micro-finance and cambio outfit will no longer be pursued. A new board for Dolla Financial is to be put in place at the closure of the sale.
The new board has already been identified, which will be headed by retired veteran banker, Jack Shirley as Executive Chairman.
The other members of the new board are Ryan Reid; Phillip Martin, a former director of Scotia Investments; Marjorie Seeberan, retired banker and former head of corporate banking at NCB; First Rock’s in-house legal counsel, Jordan Chin, who will sit in an executive capacity; First Rock Assistant Vice President of Finance, Sean Myers and the current CEO of Dolla Financial, Kadeen Mairs.
Reid explained that the composition of the new board plan is strategic in that First Rock wants to create a structure akin to a financial institution that is in the business of lending. According to the First Rock President and co-founder, “As you noticed we have brought in retired bankers, who understand banking standards etc. We want to bolster the operations as we seek to expand.”
Scrapping “The Shoppes” acquisition
Turning to other investment matters Reid disclosed that the planned acquisition of The Shoppes at Rose Hall in Montego Bay will no longer be pursued. This planned acquisition was listed in the prospectus for First Rock’s IPO as among the investments to be made from the proceeds of the public offer.
The planned acquisition was scrapped based on new information coming from the company’s due diligence of the proposed acquisition. “The due diligence never came out to our satisfaction so we are no longer pursuing,” Reid explained.