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Tuesday, February 22, 2011

Harry sends exploratory offers to possible buyers

Lanka Hospitals shares

With letters of exploratory offers being sent to possible buyers explaining why

Distilleries Company (DIST)'s stake of 29 percent in Lanka Hospitals (LHCL) should be bought, business tycoon Harry Jayawardena seems to be signaling to relinquish his involvement with LHCL as quickly as possible.

It is learnt that one such letter has been sent to Property Development Limited (PDL), the property arm of Bank of Ceylon which held 9.5 percent of Lanka Hospitals as at September 2010, offering DIST's full stake in Lanka Hospitals via a former director of DIST on behalf of DIST Chairman Harry Jaywardena. It is also learnt that the price offered to PDL shares was in the range of Rs.62.50 to 65.

The offer has been made considering DCSL's opportunity cost on holding the shares, when Harry J lost control over LHCL, followed by the Supreme Court verdict. The lackluster performance of LHCL shares in the market (due to inadequate free floating) too has contributed to the decision.

As per September 2010 interim reports, PDL has 9.53 percent of LHCL, being the fourth largest shareholder. Sri Lanka Insurance being the major stakeholder owns over 54 percent through its Life and General Funds. Around 7.5 percent of the company is owned by minority shareholders.

If PDL agrees to go ahead with the deal, the company would end up owning nearly 40 percent of LHCL, and this would trigger a mandatory offer. And if the minority shareholders decide to sell their shares amounting to 7.5 percent, PDL would be holding around 47 percent of LHCL.

According to analysts, a holding of that kind may allow the PDL to negotiate a deal with Sri Lanka Insurance, to become the major shareholder of the company. Else, the two companies acting together can acquire some shares from the market to cross the 95 percent threshold and consider taking advantage of provisions available when such a stake lies with a company or consortium.

The letter which was believed to have sent to PDL reportedly also stated that if a deal is struck, the PDL's holding company Bank of Ceylon could benefit by negotiating special rates for its present as well as retired employees who already enjoy significant health care benefits.

source - www.dailymirror.lk