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Tuesday, November 13, 2012

ERI, Taprobane in cross deals worth Rs. 3.7 b

* Binding MoU signed for Taprobane to buy 28% stake in ERI and ERI to buy 20% stake in Browns Investment

* THL convenes EGM for Friday to get shareholder nod

In a major development, Taprobane Holdings Plc andEnvironmental Resources Investment Plc yesterday announced cross deals worth Rs. 3.7 billion subject to shareholder approval at a hurriedly-convened EGM.

Taprobane Holdings Plc (THL) said it was selling a 20% stake in Browns Investment Plc (BIL) for Rs. 2.04 billion to ERI. THL will also buy a 28% stake in ERI from Lionhart Investments for Rs. 1.68 billion.

An EGM of THL has been convened on Friday to get shareholder approval. Usually for an EGM a 15-day notice is required but a shorter period is possible if the 95% of the shareholding has given consent for same.

The sale of the 20% stake (372 million shares) in BIL is at Rs. 5.50 each and includes 353 million shares held by THL and a further 19 million held by related party Lexinton Holdings Plc.

The purchase of a 28.9% stake (101 million shares) in ERI by THL from Lionhart is at Rs. 16.70 per share.

Lionhart is the single largest shareholder in ERI though it has reduced its stake considerably.

Analysts estimate Lionhart’s current stake in ERI to be around 45% from an original 95%.

Caledonian Securities Ltd. had picked up the bulk of the ERI stake and is estimated to own around 25%. Brokers to Caledonian Capital Trust Securities on 23 October disclosed that its client was holding a 13% stake. Since then additional stakes of ERI had been collected including last Friday.
ERI said the purchase of a 20% stake in BIL is being made as a “strategic investment” though THL didn’t specify any particular reason though likely to be same.

Brown and Company owns a 26.5% stake in BIL, whilst as at 31 March, THL held a 27% stake. LOLC Investments also holds a 13% stake in BIL whilst NSB owns a 5% stake.

The announcement saw BIL topping the list of gainers percentagewise yesterday in a less active market. Its share price moved up by 50 cents or 13.5% to Rs. 4.20, below the deal’s strike price of Rs. 5.50. ERI saw its share price inch also by 50 cents or 3% to Rs. 17.40.

During the short period Browns Investments PLC has been in operation, it has built a portfolio to a value in excess of Rs. 7 billion, spread over several fast-growing industry sectors including leisure, plantations, construction, manufacture, export and entertainment.

In 2011/12 financial year net profit attributable to ordinary shareholders of BIL was Rs. 2.5 billion, up by 33% over the previous year. As at 31 March 2012, Group had assets worth Rs. 16 billion, up by 35% from a year earlier. Its net asset per share is Rs. 5.85.

ERI has a portfolio that includes Ceylon Leather Plc, Dankotuwa Porcelain Plc, Colombo Pharmacy, South Asia Textiles Ltd., and DNH Financial. After a rapid rise, ERI has struggled in recent years though there have been signs of revival in recent quarters.

ERI had assets worth Rs. 13 billion (at Group level) as at June 2012 and its net asset value per share was Rs. 24.20. In FY2012, it posted a bottom line of Rs. 126 million whilst in the first quarter of FY13 it amounted to Rs. 61.6 million as opposed to a loss of Rs. 16.7 million.

source - www.ft.lk