Dankotuwa Chairman Sunil Wijesinha yesterday said that all shareholders present at Thursday’s EGM, bar one who abstained, supported the measure to issue the new shares which will infuse Rs.433 million cash into the company.
These shares will be priced at Rs.9 each - much lower than the prices recently achieved by Dankotuwa on highly speculative trading on the CSE which took the counter as high as Rs.144. The share closed on Friday at Rs.59.40, down Rs.6.50 from the previous day with 14,000 shares traded at that price.
Wijesinha said that the Japanese consortium, two of whose directors were present for Thursday’s meeting, were the company’s major shareholders controlling 43% of its equity. They would come down to between 13% and 15% following the issue of new shares while ERI would have control of the company with 66.7% of its equity.
Dankotuwa has sought SEC exemption from the rule prohibiting private placement of over 20% of a company’s issued capital and the regulator’s green light is necessary to go ahead with the issue of new shares to ERI.
"We are living from hand to mouth and the new cash will help us tremendously," Wijesinha explained. "It will also encourage the banks to lend to us.’’
The shareholders’ near unanimous decision to proceed with the private placement followed an impassioned speech by Wijesinha (see p II) who concluded by saying: " The best chance that the company has is to accept this private placement. I urge you to make a wise decision because time is running out for your company.
He also indicated that the new investors seem confident that they could turn the company around within three years. They will be completing a strategic review within a couple of months after they get in, and crystallizing their strategies.
"If you decide to vote against this resolution the Board may have to, though very reluctantly, revisit the resolution for the liquidation of the Company, as required by the Companies Act,’’ Wijesinha said.
Given the high prices that the Dankotuwa shares, powered by speculative trading, achieved on the CSE in recent weeks, questions were asked in investor circles as to whether the 75% majority to issue the new shares at a price of Rs.9 each would be given by shareholders.
"In the event, the company was able to persuade the shareholders to accept the resuscitation strategy and this was considered a major victory for the company’s management.
"Also, it seems clear that the Japanese investors had been persuaded not to part with their shares even at the spectacular prices that the share commanded on the CSE in recent weeks," an analyst said.
"ERI would most probably want the Japanese to retain their connection with Dankotuwa.’’
Dankotuwa risked liquidation if new investment and cash infusion into the company was not achieved. The company had been losing over the past six years and has been taking hits from the appreciation of the Sri Lanka rupee first against the euro and now against the dollar, high energy prices and most recently from the loss of GSP+ (from August 15) in the valuable European market.
"Several tableware factories such as Paramix at Nattandiya and the Piliyandala and Negombo factories of Lanka Ceramics have closed down finding that their real estate holdings were more profitable than making tableware,’’ an analyst noted. "Dankotuwa also owns 20 acres of prime land.’’
Analysts believe that ERI which is specializing in buying control of sick companies may be taking a risk with the Dankotuwa acquisition pointing out that even big names like Wedgewood, one of the best known names in the global ceramic/porcelain industry, was bought with great expectations by new investors.
"They are still struggling to revive the company even one and half years after the acquisition,’’ an analyst said.
Well informed sources said that Dankotuwa has been forced to delay payment of salaries to its managers, risked auctioning of supplies which they could not clear through customs up to the eleventh hour and even contend with holding product inventory without the packaging to get the tableware to the market.
"The company was near liquidation and struggling to survive with no prospect of new investment by the Japanese shareholders,’’ a well informed source said.
source - www.island.lk
No comments:
Post a Comment