Ceramic firm remains merger target for Specialised Investment Compounds

AMMAN — Specialised Investment Compounds Company (SPIC) seems adamant on grabbing Jordan Ceramic Industries through a "difficult" merger.

SPIC told the Jordan Securities Commission (JSC) in a disclosure dated August 30, 2015 that its shareholders asked the board of directors, during an extraordinary general assembly, to go ahead and follow up on the procedures for a merger with Jordan Ceramic Industries.

The shareholders also approved lowering SPIC's capital to JD12.9 million and, later, increasing it to JD27.9 million through a public or private offering.

In a previous disclosure, the company told the JSC that the board of directors weighed up the merger's progress and difficulties and recommended that the general assembly of shareholders review and decide on the matter. 

"Should the merger process prove unattainable, it would be suitable to reduce the company's capital by JD12.9 million, write off the accumulated losses by the same amount and, later, propose increasing the capital by JD15 million through a public or private offering to SPIC's shareholders or others," the disclosure, dated August 16, 2015, said. 

At the end of last year, SPIC's accumulated losses reached JD17.7 million.

In the disclosure, the company mentioned that the approach to the merger began in late 2014 and described the decision of the board of directors in that direction as, in essence, "significant in format and substance".

The company indicated that because Jordan Ceramic Industries stopped production and manufacturing activities, SPIC was interested in developing its sizeable industrial
plot of land.

"Because SPIC is a developer of industrial real estate, it was seeking to develop this terrain and create an integrated project," it said.

Besides augmenting the value for the shareholders of both entities, it added that the merger would enrich SPIC with new assets and earnings.

SPIC currently owns Al Tajamouat Industrial City, located in Amman's Sahab neighbourhood, offering investors developed land and buildings serviced with the necessary infrastructure besides support services such as catering, housing, maintenance, security and operational solid waste removal.

These supplementary functions are provided by subsidiaries and affiliates such as Al Tajamouat for Catering and Housing, and Pluto for Housing Projects.

The merger process entailed the formation of a committee that was tasked with carrying out the required procedures as stipulated in the companies' law and accounting standards.

Moreover, the Companies Control Department appointed accredited real estate appraisers and industrial experts to professionally and fairly evaluate the assets of both firms.

According to the final merger report, submitted by them to the Companies Control Department on June 9, 2015 after detailed and precise evaluation, the estimated net equity for SPIC's shareholders at fair value amounted to JD34 million.

"Since then, we awaited the official response to execute the merger report but procedural issues beyond the scope of the company's business stalled that until this date [August 16, 2015]," the executive board chairman wrote to JSC.

Executive Chairman Imad Al Madaha told the bourse a few days  later that the decline in SPIC's share price was due to supply and demand mechanism.

"Other than the merger process and substitute plans that include reducing the capital and raising it should the acquisition do not materialise, there are no core developments behind the drop in the share price," he indicated.

He noted that the bourse relegated the SPIC's share listing from the second to the third market as of August 13, 2015.

SPIC's 20th annual report covering 2014 indicated that the company was able to sign up new investments and rent 21,481 square metres of vacant areas, accounting for 13 per cent of the ready made buildings.

The company was also able to renew previous rent contracts covering 78,442 square metres, representing 48 per cent of the buildings.

The report described last year's performance as the best during the past years despite all the surrounding conditions, mentioned competition with other industrial estates, whether governmental or private, as a principal risk, noting that private developers do not benefit from many privileges and advantages like public industrial estates.

It indicated that foreign investors are bowing out because of higher production costs, such as the increase in minimum wages and energy bills, and pointed to risks arising from austerity policies that directly affect the investment climate.  

"Although a number of local investors came to Al Tajamouat Industrial City, they were unable until now to substitute the foreign investors in terms of space or number of hired staff," the report said.

An analysis of the consolidated financial statement as of December 31, 2014 showed JD4.7 million in total earnings, JD0.7 million lower than the JD5.4 million generated during 2013.

Income from rent and housing amounted to JD2.3 million, and from catering the proceeds were JD1.8 million, followed by JD0.6 million from servicing the compounds.

In 2013, the earnings were higher, mainly as a result of JD1 million income from real estate sales.

According to the analysis, the company fell back into a JD5.1 million loss last year after posting a JD1.2 million profit in 2013. In previous years, SPIC was recording losses the highest of which was nearly JD6 million  in 2011.

The 2014 loss was calculated after taking into account administrative and general expenses as well as selling and marketing costs, besides financial payments.

Further deductions or additions covered issues related to affiliates and subsidiaries, realised and unrealised losses arising from sales of investments, in addition to provisions.

Financial expenses dropped from JD1.8 million in 2013 to JD1.5 million last year as the debts fell from JD21 million to JD15.6 million.

The annual report mentioned that on February 17, 2015 SPIC paid JD0.7 million and rescheduled the remaining JD11.25 million in bonds over the coming five-and-a-half years on the same terms, guarantees and interest rate, giving the company more flexibility and capability to operate and meet obligations.

Capitalised at JD25.8 million, SPIC's shareholders equity stood at JD16 million at the end of last year, liabilities totaled JD26.4 million and fixed assets added up to JD35.1 million, an amount that included JD18.7 million net value of buildings leased to investors, JD5.3 million of land investments, JD1.1 million of projects under implementation, and JD2.3 million of property and equipment.

39 employees worked at SPIC as of December 31, 2015, when major shareholders were: Mueen Mohammad Qadadeh (7 per cent), Rudain Tawfiq Kawar (5.6 per cent), Tawfiq Amin Kamel Kawar (4.1 per cent), Lujain Ali Khalaf Al Nawayseh (3.7 per cent) and Majed Ahmad Ghosheh (3.6 per cent).