Sunday, February 10, 2013

NDB Capital to distribute treasure trove with share buyback

NDB will get most of the cash from 99.6% subsidiary

NDB Capital Holdings PLC (previously Capital Development and Investment Company - CDIC) is seeking shareholder approval to buy back one of every four of its shares at a price of Rs.545 each as a means of rewarding its shareholders by the payment of approximately Rs.6 billion of nearly Rs.6.7 billion capital gain realized by its sale last year of its stake in Aviva NDB Insurance PLC.

Nearly all this cash will go to the National Development Bank which is the predominant shareholder of NDB Capital Holdings with approximately 99.6% of its equity with other shareholder owning a very small number of shares amounting to less than one percent of the company.

On Friday 1,609 shares of NDB Capital was transacted closing at Rs. 471.60 per share, up Rs. 1.40 from the previous close.

NDB Capital shareholders have been told that the board of the company by a resolution dated February 7 has proposed that NDB Capital repurchases from its shareholders up to 10.96 million ordinary shares of the company at the price of Rs.545 per share.

NDB Capital shareholders have been told that the decision to buy back shares has been taken as there are no immediate investment opportunities available considering the magnitude of the capital gain that has been realized.

"This would enable the shareholders to optimize their returns by channeling the cash returned to preferred investments. Furthermore, the proposed share repurchase would enhance the Return on Equity (ROE) of the company that would in turn benefit the shareholders," shareholders have been told.

"The board is of the view that the remaining investible funds after the share repurchase would be sufficient to successfully implement the business plan of the company."

The directors are of the view that the proposed share repurchase is in the interest of the company and its shareholders and the company’s auditors have said that the proposed price reflects a fair value for its ordinary shares.

As the repurchase of the shares belonging to NDB Capital, permitted by the Companies Act subject to amendment of Articles which is also being done, amounts to its disposal of more than half the assets of the company, it is within the definition of a major transaction in terms of the company law requiring a special shareholder resolution.

Shareholders have also been told that the repurchased shares will be deemed to be cancelled once the transaction is completed and this would be done with the approval of Securities and Exchange Commission.

Fractional shares arising from the repurchase arrangement will be ignored and shareholders will not be given the opportunity of offering additional shares over and above their one for four entitlement for repurchase by the company.

An extraordinary general meeting of NDB Capital Holdings PLC has been summoned on March 1 to consider a new set of articles for the company in consonance with the Company Law as it currently stands as well as the share repurchase decision.
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