Dilith, Nimal strike it big!

■Acquire 40% stake in Sri Lanka’s oldest conglomerate George Steuart & Company marking a new beginning and in first major deal between the two

■Former Chairmen Scott Direckze, S. Skandakumar and current Chairman Jayantha Wimalagooneratne sell stakes; deal on Group MD Dubsy Kanagaratnam's stake pending

■Dilith to use 176 year old firm as vehicle to build a new business model and consolidate his other investments under it; Nimal to make it an associate in his first acquisition following the footsteps of his friend Dhammika Perera

Heralding what is said to be a new and long journey together top investors Nimal Perera and Dilith Jayaweera have acquired over 40% control of Sri Lanka’s oldest conglomerate George Steuart and Company Ltd., in what is their first and strategic combined deal.

The separate acquisition of different shareholdings in George Steuart is via Dilith’s investment arm Divasa Equity Ltd., whilst Nimal had bought under his personal name. The deal is worth nearly Rs. 1 billion.

Divasa had acquired holding of former GS Chairman Scott Dirckze (18%) and two other directors amounting to a total of 21% whilst Nimal had acquired stakes of current Chairman Jayantha Wimalagooneratne (13.2%) and former Chairman S. Skandakumar (8%), totalling 21%.  In the George Steuart coffee table book to commemorate the 175th anniversary last year Jayantha and Skanda were described as “Two legends…One Mission.”

Divasa had acquired the stakes late last week whilst Nimal picked up the stakes on Friday and Saturday.

The deal had been done at net asset value withGS Group assets estimated to be over Rs. 2 billion whilst last year profit had been around Rs. 350 million.

The other major stake estimated to be around 30% is held by Group Managing Director Dubsy Kanagaratnam and may go through later this week as the stake is in contention over implications of an overseas litigation.

Nimal, who is in Malaysia to attend the Forbes magazine’s Global CEOs Forum, told the Daily FT yesterday that all parties including key shareholders and senior management were supportive and cooperative to the acquisition.  After the full acquisition goes through, Nimal is expected to have around 30% stake in GS whilst Divasa will hold the controlling 51% stake. “Dilith and I have come to an understanding and I will support him in his plans to take George Steuart to a new phase of growth,” Nimal added. “This is a new beginning in terms of our partnership and going forward we will strengthen it further,” Nimal added.

Dilith said that George Steuart is a national corporate icon with origins spanning back 176 years. “In our new scheme of things in post-war Sri Lanka we see great potential in the Group and we hope to take it to the next level,” Dilith added. GS acquisition is a key feather in Dilith’s cap of acquisitions starting from Citrus Leisure (32%), Colombo Land (20%), and HVA Foods. (10%)

Via 12 subsidiaries GS Group’s business interests include export of tea, distribution of pharmaceuticals, travel and ticketing, airline representation, property development, assembly of telephones and other electronic products, freight forwarding, financial services, insurance broking and higher education. It has good real estate including the head office property at Fort, in Mount Lavinia, Nuwara Eliya etc.

The divested stakes had been up for negotiations for a protracted period and breakthrough was achieved last week. Dilith and Nimal duo apparently had been approached separately and the two came together to make it a win-win deal to all parties.

For Dilith and Divasa whose other shareholders are Varuni Amunugama Fernando and Sarva Ameresekere the GS acquisition is expected to be a major breakthrough on which it will build on to become a top conglomerate in the future rubbing shoulder to shoulder with the likes of JKH, Carson, Aitken Spence, Hayleys etc.

For Nimal too it is significant as it signalled he was following on the footsteps of his longstanding friend Dhammika Perera, who is synonymous with acquisitions in the country. Nimal said the investment in George Steuart will be longstanding and will not be included as part of his trading portfolio. Nimal had been part of all key acquisitions of Dhammika with the duo rising up the corporate ladder to become business leaders.

Some of the noteworthy acquisitions include Connaissance, Royal Ceramics, LB Finance, Pan Asia Bank, Hayleys and Delmege Forsyth. Nimal said that investment in George Steuart will be longstanding and will not be included as part of his trading portfolio.

Upon his return, Nimal and Dilith are expected to formally meet with GS Directorate.

The parent, George Steuart & Company, exercises management control over all the companies in the Group. In pursuance of this, the Parent Management Committee has been delegated with all the management powers of the company by its Board of Directors, including direct overall strategic planning as well as guiding the Executive Directors of the subsidiary companies in the Group.

The Parent company presently has six directors. Of these, the Chairman, the Deputy Chairman and the Joint Managing Directors act as the Parent Management Committee. The Directorates of all subsidiaries are comprised of the members of the Parent Management Committee and Executive Directors selected from the senior staff of the respective companies.

The current Board of George Steuart comprises J. M. Wimalagooneratne FCA, MCMI, FSCMA, CMA (Group Chairman); K. Neelakandan (Attorney at Law)(Group Deputy Chairman); D. P. Kanagaratnam B.Sc, MLIA (Dip) C.Inst. SMM (Group Joint Managing Director); D. N. Daluwatte FCA, FCMA AIMIS (Group Joint Managing Director); G. E. S. Direckze (Non Executive Director); and A.A.M. Illiyas (Attorney-at-Law) (Non Executive Director).

Last year George Steuart & Co. Ltd., celebrated 175th anniversary in grand style. It is one of the oldest mercantile establishments in the world and the oldest business house in Sri Lanka can proudly claim to be heirs to a tradition of unblemished excellence in business, spanning over a century-and-a-half of economic development in our island nation.

As part of an announcement marking the 17th anniversary Chairman Wimalagooneratne said: “Our future plans include investing in agricultural projects and eco-tourism, the acquisition of an equity stake in an Indian pharmaceutical company and in a pharmaceutical marketing company in the Philippines.  We are seriously pursuing overseas investment to ensure stability and growth for the group.”

The company was founded in 1835 by James Steuart, an intrepid and high-principled sea captain, who sailed the southern ocean at the beginning of the 19th century. In the course of a voyage to Ceylon, as it was known then, he recognised the immense potential for economic development and commerce in this country.

In 1835, James Steuart, with his brothers Joseph and George, set themselves up in Ceylon as Merchant Bankers operating on a modest scale. The firm gradually grew from its original business into an Agency House. There was clear nexus between the original merchant banking and the company’s new operations as an Agency House. Soon George Steuart & Co. Ltd. made Ceylon a large-scale producer of coffee.

The major coffee blight of the 1870s wiped out Ceylon’s coffee production altogether, but proved to be no more than a temporary setback for the company; in the ensuing decade it bounced back into the mainstream of business as tea replaced coffee as the country’s leading export.

George Steuart & Co. Ltd. was incorporated and became a Limited Liability Company in 1954. The Head Office building, owned by the company, was developed to make way for a new high-rise building – Steuart House – in the heart of the Colombo’s business and financial district.

The company overcame yet another severe setback nearly a hundred years later when, in 1975, the overnight nationalisation of plantations put it out of business at a time when it was managing the largest acreage of tea plantations in the island.

Undeterred, the company prudently moved into a number of other fields of business selected to ensure its survival while catering to the growing needs of the country. Its efforts have met with unqualified success and today the Group boasts of subsidiaries which are themselves leaders in their own right, in fields covering the export of tea, the distribution of pharmaceuticals, travel and ticketing, airline representation (General Sales Agent for airlines), property development, the assembly of telephones and other electronic products, freight forwarding, insurance and higher education. Not the least of them is its venture into the recruitment of Sri Lankan professionals for reputed principals overseas.

source - www.ft.lk