Jamaica Gleaner News - Buy up companies, not paper assets - Whittingham - Business - Sunday | July 18, 2010

Jamaica Gleaner News - Buy up companies, not paper assets - Whittingham - Business - Sunday | July 18, 2010

Note: Mergers of private companies here in Florida also makes a lot of sense to reduce overhead and improve cashflow.

With interest rates trending downwards and government paper not as attractive as before, businessman Steven Whittingham is suggesting that investors think about investing in private companies as an asset class.

With the recent success of the Jamaica Debt Exchange programme, said Whittingham, chief executive officer of Island Ice and Beverage Company Limited, fixed-income investments are now less attractive, while debt financing for company acquisition is now cheaper.

"I think it is a very good investment opportunity specifically for the local market here," he said.

"The idea is that with lower interest rates come greater opportunities to be able to buy a private company in good conscience."

Whittingham, who was speaking at the inaugural Stocks and Securities Limited's investors forum in Kingston last Wednesday, related his own experience when he bought Kingston Ice two years ago and merged it with Beverage Company Limited to form Island Ice.

It was, he said, one of his best decisions.

"The other thing I would say, why I think it is a good idea to invest in private companies, is that it is a customisable hybrid asset and that simply means that you can do whatever you want with that investment - you can tailor it anyway you like," he said.

Whittingham, a private-equity investor, said many of these private companies come with real assets, such as land, equipment and buildings.

"If you take a look at returns of private-equity companies or venture capital, they have done extraordinarily well and they have generated a lot of wealth for the people who have taken the leap and taken the risk of investing in these types of ventures," he said.

He also touted the opportunities for a better tax structure, which a company can negotiate.

Whittingham also commended the Jamaica Stock Exchange (JSE) for forming the junior market, which he said, was putting the country in a position to fund its companies and get them moving in the right direction.

Three companies have listed on the JSE Junior Exchange since its April 2009 launch, and another five are said to be in various stages of preparation to float their shares.

Junior market companies qualify for full tax exemption on profits for the first five years after listing, and thereafter, tax on 50 per cent of profits for an additional five years.

dionne.rose@gleanerjm.com