As successful family businesses age through generations, entering into an initial public offering (IPO) of shares raises the profile of companies and sets a level of independence.
Eric Solis Marketing Ltd (Solis), a provider of multifunction printers, print solutions, and commercial displays in T&T for over 50 years, launched its initial public offering IPO of 2,750,000 ordinary shares at $4 on Tuesday, potentially raising $11 million. This represents 33 per cent of the total issued ordinary shares in the company, valuing it at about $33 million.
In a sit-down interview with Business Guardian on Monday, executive chairman of Solis, Angella Persad, said many family companies do not survive more than three generations, so doing an IPO and going public brings a different profile to the business and takes it to another level.
“You can attract a different level of talent, who would be more willing to join your company as many people don’t want to work in a family-owned company. That is because they may say, well, I don’t know what’s going on there, my career path will always be limited. But in a publicly listed company, they could understand that there’s a different level of governance, there’s a management and a leadership team that will operate in a certain way,” Persad explained.
She said the IPO follows the company’s growth in profitability over the last five years. Also, she said the Solis parent company, The Office Authority, which is owned by several private shareholders, acquired Solis 17 years ago.
“We want to be able to know that it has taken on a profile, almost of independence. You know that the company is like you have a child; you nurture the child for a certain time, and then you step back and let it blossom. We have full confidence in the leadership team that’s there now,” Persad disclosed.
She noted that the employees from both Solis and Office Authority will now be able to buy shares in the IPO.
The lead broker, arranger, and underwriter for the offer, appointed by Solis, is NCB Merchant Bank (T&T) Ltd (NCBMBTT).
During the interview, the bank’s CEO Marli Creese said Solis is a longstanding client of NCB and when the Solis team told them the path it was considering, the merchant bank was very supportive.
“So much so that we told them that we would be very interested, not just in being a lead arranger and broker for the transaction, but also in fully underwriting the offering. From a basis of arrangement standpoint, what we mean when we say that NCB Merchant Bank is the underwriter of the offering is that if in a hypothetical instance, let us say that there are absolutely no applications, we put our balance sheet on the line to ensure that the offering is fully subscribed,” Creese detailed.
If the IPO is fully subscribed, NCB Merchant Bank would be entitled to acquire up to 825,000 shares in Solis, which is 30 per cent of the 2,750,000 shares being offered in the IPO.
He said typically, what has been seen in the local capital market is that when a company goes public, it may find a broker, who agrees to take the company public, but often on a best-efforts basis. This means the IPO is only partially underwritten.
“In our case, we had the confidence to say we are prepared to fully underwrite this offering,” Creese said.
Asked if now is a good time to do an IPO for an SME, Creese said, “It’s always the right time for the right company.”
On the issue of what made NCB confident that Solis was ready to go the route of an IPO, the capital markets said to go for a listing, a company’s profits have to be over a certain amount.
“If we’re talking about the T&T Stock Exchange requirements for being listed specifically on the small and medium size (SME) market, it’s very transparent. The issued share capital of the company has to be within a particular range. They cannot be a subsidiary of a publicly traded entity that is domiciled outside of Trinidad. There’s a certain minimum percentage of the company that has to be listed. For T&T, that percentage is 30 per cent,” he added.
In terms of headcount, Rishi Baddaloo, group managing director at The Office Authority, said at Solis there are 30 permanent employees and 300 at the parent, who provide mid and back-office services to Solis.
“We are a fully integrated group. So what that means is Solis doesn’t have a direct human resource manager or a direct finance manager. Those are group positions that provide those services to Solis,” Baddaloo detailed.
He noted that 40-45 per cent of the staff are service technicians.
Questioned on whether the demand for copying services has declined over the years, due to people scanning documents using their phones, the group managing director said The Office Authority sells consumables such as copy paper, and if one looks at the global trends in usage of copy paper, it is not declining.
“It is showing a slow but steady increase in usage, an increase in consumption. And while technology has disrupted paper-based usage in a sense, that is a comprehensive statement. If you look at trends where far more workers, especially in developing countries, are moving from rural jobs or industrial-type jobs to more professional services, more office-type work, the usage and the demand for printing, for copying is on the rise.
“So we haven’t seen any drop-off or disruption. In the prospectus, people would see that we have experienced growth in the company. But one of the uses of the capital that we are raising is to diversify the revenue streams of Solis,” he said.
As it pertains to expanding the company, Baddaloo said Solis has contracts in Guyana and the Eastern Caribbean, while those are relatively small compared to the size of the business, they are good footprints for expansion in the future.
“The ability to access foreign exchange for any business is important, so most businesses would not turn down an opportunity to grow their business, outside of T&T or regionally. I would say we would be very disciplined on how we approach it,” he added.
Solis is an authorised dealer for major international brands such as Lexmark, Konica Minolta, HP, Brother, RISO, Fellowes and Samsung.
