By NEIL HARTNELL
Tribune Business Editor
The Bahamas International Securities Exchange’s (BISX) chief executive is a principal in a $15 million deal to acquire the well-known Bargain City Shopping Plaza on Carmichael Road.
Keith Davies confirmed to Tribune Business that he had partnered with Dr Gregory Carey to acquire the property, and its operating businesses, from 20-year owner, Peter Roker.
The duo are currently attempting to raise between $10-$15 million from investors via a private placement in the Bahamian capital markets to finance the purchase and their “incredible plans” for expansion and adding new businesses at Bargain City.
Speaking to Tribune Business after this newspaper was tipped to the impending deal, Mr Davies said it was “very true”.
“Leno Corporate Services are the guys we’re working with, and we have gone out to market to raise between $10-$15 million,” Mr Davies said. “It’s out in the market, and we’ve got some bites. We’ve gone to select persons to do it.
“Right now, it’s at a critical stage. We’ve got some people wanting to take up all of it, but it involves a foreign component.
“We had extended it in the last month, and are looking to close it now; to close it off. It takes investors a while to decide. Today I had entities calling me, saying: ‘Is it too late? Can I do ‘x’?’ Entities that I have been working with, I am still talking to them and looking for them to close off this deal for us.”
This newspaper understands that some Bahamian institutional investors have supported the Bargain City offering, with the purchase akin to a private equity/venture capital-type deal. The offering is a private placement, meaning only targeted investors have been approached, and the public should not seek to get involved.
Tribune Business sources also suggested Messrs Davies and Carey were trying to close the offering, which involves redeemable corporate bonds carrying a variable 8 per cent interest coupon, by Friday’s Labour Day.
Mr Davies reiterated that they were seeking to “close it off” imminently, adding that $10 million was required to seal the purchase. He added that they were seeking up to $5 million extra to finance operations and their expansion plans for Bargain City.
“It took us about a year,” he said of the acquisition process. “We got it audited, did all the legwork and it’s a very successful business. The goal for us now is to close the deal as quickly as possible, and to then invest in upgrading and expanding the business.
“It [the private placement memorandum] says about $15 million, but in terms of what we need to close the deal, it’s around $10 million. But we’re looking for $15 million to do the expansion, take on new business and have cash for the operations.”
Tribune Business sources familiar with the offering revealed that Bargain City is generating around $2 million in annual net profit, with a debt coverage ratio of 3.5x and 10-15 per cent margin.
“The profitability is amazing,” one source said.
“It’s actually a little more than that,” Mr Davies told Tribune Business, when asked about the net income figures. “He’s [Mr Roker] run it for 20 years himself, and been extremely successful. It’s pretty much customer-based and focused. It’s a success story.”
Tribune Business understands that Mr Roker’s decision to seek a buyer is related to succession planning, and the desire for someone else to come in and take Bargain City to “the next level”.
One of the keys to his success appears to be the fact that Mr Roker owns both the physical plaza (real estate) and the businesses that operate in it. Apart from a gas station, Bargain City also includes numerous retail businesses that include a grocery store; liquor store; building supplies and hardware store; restaurant; the Hibiscus Inn; and a landscape business.
Mr Davies declined to go into detail on his and Mr Carey’s plans for Bargain City, saying he would disclose more once the acquisition closed.
“We’ve got incredible plans down there,” he told Tribune Business. “It [Bargain City] is one of those things that Bahamians should be proud of. Someone has done this wonderful work down there, and he is willing to step away but still be part of this, and have someone take it to the next level.”
Mr Davies told Tribune Business he had no plans to leave his post as BISX’s chief executive in the short-term, adding that he would become a director of Bargain City once the purchase closed.
He added that he and Dr Carey had already identified a management team that would “be in there day to day, getting things done”.
And Mr Davies said Mr Roker was “going to stay in it once we’re completed”. Tribune Business understands that the latter will still be involved with Bargain City’s management for at least eight to nine months after the purchase closing to aid the transition to the new ownership.