Shareholders at Browns Beach Hotels PLC, part of the Harry Jayawardena-controlled Aitken Spence Group, on Monday defeated a resolution to issue 53 million new issues to raise over a billion rupees in debt financing.
However while on the surface it appeared to be a rare loss for Sri Lanka’s most powerful business magnate as shareholders voted against a resolution at a Browns Beach EGM at the Aitken Spence office in Colombo, in reality it was not unexpected as a large percentage of the controlling shareholders had publicly announced earlier they were not subscribing to the rights issue. More than 90 per cent of the shares of Browns Beach is owned by Melstacorp Ltd, Aitken Spence Hotel Holdings PLC, Stassen Exports Ltd, Lanka Milk Food (CWE) Ltd among others – all controlled by Mr. Jayawardena.
However while on the surface it appeared to be a rare loss for Sri Lanka’s most powerful business magnate as shareholders voted against a resolution at a Browns Beach EGM at the Aitken Spence office in Colombo, in reality it was not unexpected as a large percentage of the controlling shareholders had publicly announced earlier they were not subscribing to the rights issue. More than 90 per cent of the shares of Browns Beach is owned by Melstacorp Ltd, Aitken Spence Hotel Holdings PLC, Stassen Exports Ltd, Lanka Milk Food (CWE) Ltd among others – all controlled by Mr. Jayawardena.
The money was to be raised for a Browns subsidiary, Negombo Beach Resorts which owns and operates the Heritance Negombo, a 5-star resort which was completely renovated and opened under the current name from its former glory, Browns Beach Hotel. The old hotel was demolished and reopened in April 2016 under the Heritance brand owned by the Aitken Spence group.
In August 2016, the board of directors decided to offer five new shares for every 12 shares held by shareholders at a price of Rs. 25.85. In August, the market rate of the share was Rs.29.30 to Rs. 30 per share.
However, according to the company’s resolution, the price fell sharply to Rs.24.50 by end August and Rs.20.20 on January 31, 2017, Rs. 5.65 below the rights issue price, a factor that shareholders would have taken seriously into consideration. It was also unclear for the delay ns holding the EGM (more than eight months after the board decision) unless it was due to procedural matters.
“The company requested a price revision (to reduce the rights issue price) but the Colombo Stock Exchange was not agreeable on the basis that such a revision would result in misleading the market which has already reacted to the price announced by the company,” the company notice said.
Thereafter 53 per cent of the company stake held by ‘related parties’ opted to withdraw from subscribing to the rights issues.
With 90 per cent of the shares held by ‘related parties’, the company was confident of full subscription and didn’t seek any underwriter, in case of a lack of subscriptions.
While the company notice on the resolution listed the directors of the Browns subsidiary as Harry Jayawardena, his daughter - Stasshani Jayawardena, Susith Jayawardena and Christie Ranjan Jayawardena, an error appeared to have crept in as the last named director is Christie Ranjan Stanislaus (not Jayawardena). The last named is on the main board of Browns.
While the company notice on the resolution listed the directors of the Browns subsidiary as Harry Jayawardena, his daughter - Stasshani Jayawardena, Susith Jayawardena and Christie Ranjan Jayawardena, an error appeared to have crept in as the last named director is Christie Ranjan Stanislaus (not Jayawardena). The last named is on the main board of Browns.
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