Citrus group in major restructuring exercise

In a major restructuring move, the Citrus group, controlled by Dilith Jayaweera and Varuni Amunugama Fernando, is to consolidate all its hospitality sector operations under Hikkaduwa Beach Resort PLC, whose parent is Citrus Leisure PLC (REEF). The Citrus group has three listed hotel properties-- Hikkaduwa Beach Resort PLC, Kalpitiya Beach Resort PLC and Waskaduwa Beach Resort PLC and the privately held Passikudah Beach Resorts Ltd.

The restructuring, which is subject to shareholder and regulatory approval, will place Kalpitiya Beach Resort PLC (CITK), Waskaduwa Beach Resort PLC (CITW) and the privately held Passikudah Beach Resorts Ltd under Hikkaduwa Beach Resorts PLC (CITCH), which owns a  1986-perch land in Passikudah and is yet to commence operations. Accordingly, CITH will make a voluntary offer to acquire CITW in full with 5 CITH shares being offered for every 12 CITW shares at a price of Rs.24 per each new CITCH share. CITH will then amalgamate with CITK with 5 CITH shares being offered for every 12 CITK shares at a price of Rs.24 per share. Passikudah Beach Resorts Ltd, which is 100 percent owned by REEF will also be amalgamated with CITH with CITH issuing 688, 268 new shares priced at Rs.24 each to REEF. The CITH share closed at Rs.13.50. The company had a book value per share of Rs.20 as at March 31, 2016.

“The proposed strategic restructuring under the guidance and advice of NDB Investment Bank Limited, will create three unique strategic verticals—owning and operating resorts, third party resorts under management and other leisure related services,” a Citrus group statement said. The statement further said the move would improve operating efficiencies and provide opportunities to capitalise on group synergies. 

“In addition to operational efficiencies, it is believed that the consolidated entity is in a better position to pursue more growth opportunities and the strengthened financial position enhancing fund raising capabilities both via equity and debt through strategic partners and financial institutions,” it added. 
  The Citrus board was also of the view that the proposed restructuring exercise would enhance the shareholder value at all levels in the future compared to the constraints of stand-alone resort properties as at present. 

“The consolidation will also mitigate the risk associated with a single leisure sector property and enable them to benefit from operational efficiencies of a portfolio of resort properties and partner an entity with better growth prospects,” the statement noted.