Ascot Holdings mandatory offer closes with consortium of buyers upping stake to 67%

Ascot Holdings PLC closed its mandatory offer with the acquirers upping their stake to 67.18 percent from the 45.16 percent they held prior to the offer announcement. 
A consortium of local and foreign shareholders on October 24 bought 44.98 percent stake in the property and hospitality group for Rs.241.6 million, giving the firm a valuation of Rs.42.50 a share. 

It later transpired that the two leading shareholders – Rohan Iriyagolle and Pasan Madanayake – who together held 43.16 percent stake in the group via their investment vehicles Axis Investments Private Limited and St. Louis Capital (Pvt) Limited on margin provided by a private commercial bank, were the 
major sellers. 

As the share sale crossed 30 percent stake, it triggered the Securities and Exchange Commission’s Company Takeovers and Mergers Code and the consortium of buyers offered to purchase the balance shares of the company from the minority shareholders at Rs.42.50.

The offer was made by Eighth Wonder, a Mauritius-based company and Ian Joseph McVeigh, one of the UK-based individuals to the initial purchase, who held 24.52 percent and 11.63 percent stakes among them. 

The other two individuals who participated in the October 24 deal were Archie James Buckland Warman, a UK-based investor with a 3.30 percent stake and Mohamed Hisham Jamaldeen with a 5.51 percent stake. 

According to the disclosure to the Colombo Stock Exchange, when the mandatory offer expired on November 29, the holders of approximately 22.02 percent shares had accepted the offer made by the controlling shareholder consortium bringing up their total holding in the group to 67.18 percent. 

As of September 30, high net worth investor Nimal Perera held 11.13 percent stake in Ascot Holdings under margin provided by Seylan Bank PLC, but it is still not known whether Perera was among the sellers during the offer period. 

An independent advisors report released soon after the mandatory offer was announced on November 7 advised the minority shareholders with short-term investment horizon to take up the offer as the offer price offered a significant premium to industry specific multiples as well as the cash flow based valuation of the company. 
“It should be noted that the Ascot share is not highly liquid and that disposing of large quantities later-on with the intention that the share price will appreciate in value will be challenging”, the independent advisors report said.  The valuation report showed that the offer price of Rs.42.50 is a 19 percent discount to the net asset value of the firm but the industry is such that the general trading patterns indicate a trading price that is lower than the net asset value of the firm is a common occurrence. 
Ascot Holdings’ history of dealings is marred by large scale corporate malfeasants and the firm was at the forefront of a suspected pump-and-dump share trading scheme during the market bull run during the 2010-2012 period. 

A day prior to the mandatory offer closure announcement, the company disclaimed the liability for a secondary mortgage bond given on its property at T.B. Jayah Mawatha at Colombo 10 for Rs.350 million to a private commercial bank.  The Prime Minister, Ranil Wickremesinghe making a special statement in parliament last week said investigations into the bond sales between 2008 and 2014 as well as the share market manipulation during the same period, which saw some worthless stocks dumped on the Employees’ Provident Fund would begin soon after the current probe into the bond scam is completed.