DFCC summons EGM to clear amalgamation proposal

The DFCC Bank has summoned an extraordinary meeting on August 28 to obtain shareholder approval for amalgamating the DFCC with the DFCC Vardhana Bank (DVB) which is its commercial banking unit.

The amalgamation proposal document says that the DFCC currently owns 99.17% of DVB and had at the time of its initial investment in DVB, obtained the approval of the Central Bank for operational management of that entity.

Earlier the DFCC and NDB were in talks to examine amalgamating the two banks. But these plans were abandoned following the change of regime last January.

"Accordingly, all service functions except for the finance functions are currently managed on a group basis. Further, corporate and lending functions are also managed on a group basis," the document said. "Retail lending and other related business activities are handled at DVB on a stand-alone basis. Foreign exchange transactions on behalf of customers are only undertaken by DVB."

"However, the Boards of DFCC and DVB are of the view that the full synergistic potential of the two entities had not yet been realized due to factors such as the existence of two legal entities, two categories of staff and two versions of the core banking system.

Also, regulatory changes in the last few years and anticipated regulatory developments are also factors that affect the continuation of the current model of continuing as two separate legal entities. The amalgamation is expected to realize all the remaining synergies by becoming one legal homogeneous entity, DFCC said.

The DFCC will continue its development financing business following the amalgamation when it will become a licensed commercial bank. Given its development banking expertise and skills accumulated over 60 years, it plans to further expand this business, shareholders have been told.

The document says that while DFCC as a specialized bank markets a narrow range of products, vis-a-vis commercial banking, it particularly focused on project lending which DVB does not focus on.

"Business units of the amalgamated bank will be able to market a fuller range of products, which will bring in improvements in cross-selling of products leading to a higher share of wallet of the customers," the document said.

Other improvements anticipated include staff related efficiencies, system related efficiencies, institutional strength, higher branch banking efficiencies and tax efficiencies.

DFCC has told its shareholders that it currently enjoys three regulatory benefits as a licensed specialized bank. These are not having to maintain statutory reserves on fixed deposits, not having to maintain liquid assets on its term borrowings and not being subject to net open position on foreign currency exposures arising from credit line borrowings.

"A licensed commercial bank does not enjoy these benefits and as such DFCC will lose these benefits with the proposed amalgamation," the document said. "However, the merged bank can expect to be assigned a higher net open position which will enable it to undertake larger value foreign exchange transactions on behalf of its customers than can be presently undertaken by the stand-alone DVB."

DFCC has requested the Central Bank to continue these benefits at least for a limited period. It said that in the long term, it will be able to develop a low cost current and savings deposit base and bring down its cost of funds to a more competitive level.

"There is a reasonable expectation based on precedent that the merged entity will be granted time to fully comply with regulations applicable to a licensed regular bank," DFCC said.

The Bank of Ceylon with 14.35 % of the DFCC Bank is its biggest single shareholder, followed by HNB (12.22%), Life Fund of the Sri Lanka Insurance Corporation (10%), EPF (9.19%), Mr. M.A Yaseen (7.26%) and Melstacorp (6.43%).

The amalgamation proposal document said that the DFCC has already sought approval for the appointment of an additional non-executive director from the Central Bank and approval is pending. It further said that it intends to seek Central Bank approval after the amalgamation for a serving independent director and the current executive director of DVB to be appointed to the DFCC Board.

The DFCC Board now comprises Messrs C.R. Jansz (Chairman - non executive), Arjun Fernando (CEO/executive), K.D.N Ranjith Asoka (non-executive, Treasury representative), Ananda Atukorale (non-executive) , K.P. Cooray (non-executive), T. Dharmarajah (non-executive), Mayura Fernando (non-executive) Ms. V.J. Senaratne (non-executive) and Ms. Shibani Thambiayah (non-executive).

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Resus shareholders approve share buyback plan

Shareholders of Resus Energy PLC, previously Hemas Power, Friday adopted two resolutions at an Extraordinary General Meeting enabling the company to buy back its shares in the proportion of four shares for every seven held reducing its stated capital from Rs. 1.674 billion to Rs. 1.374 billion.

A Stock Exchange filing by Resus said that the company will buy up to a maximum of 71.54 million shares from its shareholders at a price of Rs. 24 per share a cost of Rs. 1.7 billion which will be a distribution to shareholders in terms of the Companies Act.

The deal which is a major transaction in terms of the Companies Act requiring shareholder approval was passed by a resolution adopted at the EGM.

In October 2014 Hemas Holdings PLC entered into an agreement to sell its shareholding in Hemas Power PLC to a consortium of buyers, consisting of NDB Capital Holdings PLC, ACL Cables PLC and Trydan Partners Ltd.

The deal was concluded at a price of Rs. 1.68 billion. Hemas Holdings held 75% of the shareholding of Hemas Power, consisting of 93.9 million shares of 125.2 million in issue.

In December 2014 the name of the company was changed from Hemas Power to Resus Energy.

Since ownership of the company changed, a thermal plant has been sold and the company has said that it had more cash than what was needed for running the business. Analysts regard the buyback arrangement now approved by shareholders to be advantageous to both the controlling and minority interest of the company which is quoted on the Colombo Stock Exchange.

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Hikkaduwa Beach Resorts borrows Rs. 480 mn. against Citrus property

Hikkaduwa Beach Resorts PLC has mortgaged its Hikkaduwa property on which the Hotel Citrus is located to the Sampath Bank as security for borrowing Rs. 480 million at an interest rate of one percent above the Average Prime Weighted Lending Rate, the company announced in a Stock Exchange filing on Friday. 
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People’s Bank & People’s Leasing & Finance make mandatory offer People’s Merchant Finance

The People’s Bank and People’s Leasing and Finance have made a joint mandatory offer of Rs. 22 a share to other shareholders of People’s Merchant Finance PLC to purchase their shares in People’s Merchant Finance (PMF) and the offer document is now with shareholders.

On July 3 this year the joint offerors acquired a total of (approx) 6.46 million shares (9.57%) in PMF triggering provisions of the Company Takeovers and Mergers Code of 1995 and became liable to offer the 22-rupee price to all remaining shareholders of PMF.

This totals an aggregate of approx. 34.58 million shares (51.23%) that the two offerors do not already own.

The acquisition of 9.57% of the shares of PMF in July took the People’s Bank and People’s Leasing and Finance above the 30% threshold obligating the mandatory offer at the 22-rupee price which is the highest they had paid in the preceding 12 months.

Assuming full acceptance, the cost of buying all the shares they do not already own would cost approx. Rs. 760.7 million which the People’s Bank has certified in the offer document as available to the offerors.

Describing the People’s Bank as "one of the largest commercial banks" and People’s Leasing and Finance as "the largest leasing and finance company" in the country, they said that acquiring a controlling stake in PMF will give them an opportunity to deploy their expertise to enhance the performance of PMF adding greater value to its shareholders.

They intended to continue the operations of PMF as a standalone business, managed independently and there are no immediate intentions to absorb that company either into the People’s Bank or People’s Leasing and Finance.

The joint offerors also said they do not intend making major changes to the current business operations of PMF nor any intention of redeploying any of PMF’s fixed assets. They would retain existing employees of PMF and maintain the status quo.

Prior to July 3, 2015, the People’s Bank and People’s Leasing and Finance owned 39.20% of PMF with the People’s Bank owning 26.13% and People’s Leasing and Finance 13.07%. This increased after July 3 to 30.93% and 17.84% respectively totaling 48.77%.

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Dialog and Asiri form JV for e-healthcare

(LBO) – Sri Lanka’s Dialog Axiata PLC, which has interest in mobile, fixed telecom and pay television, said it will incorporate a joint venture company with Asiri Hospital Holdings PLC to develop infrastructure for the Sri Lankan healthcare sector.

Digital Holdings Lanka, a wholly owned subsidiary of Dialog Axiata, and Asiri Hospitals have formed the JV company called Digital Health (Pvt) Ltd, a statement to the Colombo Stock Exchange said.

“Digital Holdings and Asiri Hospitals have come together to incorporate Digital Health with the objective of developing and operating a state-of-the-art electronic commerce infrastructure for Sri Lanka’s healthcare sector,” it said.

Digital Holdings will take a 70 percent stake in the company, and Asiri Hospital will take 30 percent.

Sri Lanka Abans June net profit up sharply

ECONOMYNEXT –Sri Lankan retailer Abans Plc said June 2015 quarter net profit shot up 487 percent to 440 million rupees from a year ago helped by sharply higher earnings from its retail business.

Earnings per share for the quarter were 201.18 rupees, a stock exchange filing said.

Sales rose 24 percent to nine billion rupees from the previous year. The accounts showed profits from trading shot up 434 percent to 399 million rupees.