Lasco companies consider merging to grow

Lasco Distributors Limited and Lasco Manufacturing Limited are thinking of merging to combine their cash and grow their business.

It could position them to buy large companies and improve how they operate.

“It is something that we have talked about, and we have been talking about for some time. It is something that the board is considering,” said James Rawle, executive chairman of both companies and managing director of Lasco Manufacturing, during the Mayberry Investor Forum at which he was the featured presenter on Wednesday.

The two companies hold $22.5 billion in combined capital, with Lasco Distributors at $9.5 billion and Lasco Manufacturing at $13 billion as at March 2024.

Rawle said a management meeting had discussed merging both companies as part of a long-term plan, back in 2019.

“What do we do with the companies? Do we look for synergies? Do we form one company?” Rawle said.

At the end of March 2024, both Lasco Manufacturing and Lasco Distributors migrated from the junior market to the main market of the Jamaica Stock Exchange, which Rawle now says was considered an important step in the plan for the prospective merger.

The two companies hold a combined $5.8 billion in cash: Lasco Distributors has $2.2 billion, and Lasco Manufacturing has $3.6 billion.

Both companies rely on each other, with 60 per cent of Lasco Distributor’s business coming from Lasco Manufacturing, according to Rawle.

Lasco Distributors operates from Red Hills Road in Kingston, but while Lasco Manufacturing also uses Red Hills Road as its registered office, the business operates from White Marl in St Catherine.

Their history on the Jamaica Stock Exchange began in 2010 when they and a third affiliate, Lasco Financial Services Limited, were listed on the then one-year-old JSE Junior Exchange. The IPOs were brokered by Mayberry Investments.

Merging Lasco Distributors and Lasco Manufacturing could create many acquisition opportunities, reasoned Dan Theoc, senior vice-president of investment banking at Mayberry Investments.

“I am pitching deals at them when I can,” said Theoc, who moderated the forum. “Most of the growth is organic. But with all that cash we would like to see inorganic growth,” he said. The term ‘inorganic’ is mostly a reference to M&A activity.

Still, John De Silva, the managing director of Lasco Distributors, says his primary focus is currently organic growth. Organic generally refers to products and services, and innovations.

“I hear the point about possible consolidation, but right now we are really focused on running the business to take market share, grow volumes, and improve margins. There are a lot more ways to create value that way,” De Silva said.

Mayberry CEO Gary Peart said having a lot of cash can help Lasco buy other companies, but also make it more attractive to buyers. Peart estimated that combined cash and other convertible assets could total $10 billion.

“The cash on the balance sheet can buy most competitors, either with straight cash or some debt,” Peart said. “For anyone looking to buy Lasco, having $10 billion in cash means you can use the cash to help pay for the purchase.”

The more cash you have, the more attractive you become to international investors, Peart added.

The Lasco companies were co-founded by the late Lascelles Chin. Lasco Manufacturing, originally called Lasco Foods Successors Limited, started operating in 1994, while Lasco Distributors launched in May 1988.

business@gleanerjm.com