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Wednesday, February 29, 2012

Harry’s Melstacorp buys 11% more in Spence for Rs. 5 b

SLIC books hefty Rs. 4 b capital gain as an eager Harry secures large block

Ups control to 40.8%

Melstacorp to revise Spence mandatory offer price to Rs. 115 per share from Rs. 113

Business tycoon Harry Jayawardena-linked Melstacorp Ltd. yesterday acquired a strategic block of an 11% stake in Aitken Spence Plc for Rs. 5 billion, paying a price above that of the ongoing mandatory offer.

Melstacorp, a fully-owned subsidiary of Distilleries Company, bought a 10.8% stake or 44.03 million shares at Rs. 115 each (Rs. 2.17 above the mandatory offer price of Rs. 112.83) in a deal worth Rs. 5.06 billion from Sri Lanka Insurance Corporation (SLIC).

Analysts said the above mandatory offer price suggests that Harry was eager to clinch SLIC’s stake, which incidentally was acquired when the Distilleries-involved consortium owned and managed the insurance giant.

Some estimated that the actual cost for SLIC was around Rs. 18 to 20 per share, which means it booked around Rs. 4 billion profit from the sale. SLIC held the stake via General fund (6.4%) and Life fund (4.43%).

With yesterday’s acquisition, Harry now controls around 40.8% stake in Spence. The next remaining block is a 7% stake held by EPF. The control is via Distilleries (28%) and Milford Exports along with Stassen Exports (2%) in addition to Melstacorp’s 11% acquired yesterday.

Net asset per share of Spence at Company level is Rs. 23.66 and at Group level it is Rs. 57. Spence’s forward PE is 13 times and price to book value is two times.

The buy by Melstacorp however was in line with current market price. Spence closed last week at Rs. 116, up by Rs. 2 from the previous week. Yesterday it began trading at Rs. 119.90 (intra-day highest) whilst prior to the mega crossing of 44 million shares, a few blocks went at Rs.115 level before closing at Rs. 115.50.

As exclusively reported by the Daily FT on Monday, foreign funds have of late stepped up buying into Aitken Spence. They picked up a 1% stake for Rs. 516 million last week.

Distilleries at company level had revenue reserves of Rs. 25 billion as at 31 December 2011, up from 21.7 billion as at March 2011 and Rs. 16.8 billion as at December 2010. Its recent major investment (via Melstacorp) was a 3.2% stake in JKH, currently worth Rs. 4.76 billion.

Last week Melstacorp acquired a 9% stake in Lanka Milk Foods for Rs. 350 million, thereby increasing Harry’s control to 52% and a mandatory offer is pending.

source - www.ft.lk