Thailand stock exchange listed digital finance company, Group Lease Public Company Limited’s (GLPCL) Singaporean subsidiary, Group Lease Holdings (GLH), yesterday completed the acquisition of 95.4 million shares or 29.99 percent stake in Sri Lanka’s Commercial Credit and Finance PLC (CCF), a licenced finance company, in deal valued at a whopping Rs.10.6 billion.
The sellers of the shares were, BG Investments Private Limited, Creations Investment Sri Lanka LLC and an individual named Stephen L. Lafrance Jr., who sold 6.98 percent, 22.26 percent and 0.74 percent of CCF, respectively.
Prior to the acquisition of shares by GLH, BG Investments, controlled by CCF CEO Roshan Egodage, held 58.44 percent of CCF, while Creation Investments held 28.66 percent and L. Lafrance Jr. held 0.74 percent.
Yesterday’s deal valued the CCF share at Rs.111, much higher than its current trading price and the book value of Rs.28.40. The CCF share ended at Rs.60.60, losing Rs.3.80 or 5.90 percent, at yesterday’s market close.
The deal will not trigger a mandatory offer as per the SEC’s Takeovers and Mergers Code, as the acquisition remains less than 30 percent of the issued shares of CCF. This is the second such large equity investments made into the company within a matter of three years as Creations Investment Sri Lanka LLC invested Rs.1.68 billion in CCF two years ago marking, “the biggest foreign investment into a finance company”, the CCF said in a statement.
According to CCF Chief Operating Officer, Rajiv Casie Chitty, after yesterday’s deal the company foresees many avenues opening up for future capital raising amid opportunities for synergies and growth. The acquirer also shared the similar sentiments over the deal, which marked its first major expansion outside of the ASEAN region.
GL has operations in Cambodia, Laos, and Indonesia. “We look to combine our efficient digital finance platform with CCF’s very successful track record in the field of finance, to grow our businesses in all markets where we are and will be present, while CCF’s need to access to capital can easily be met by our capability to raise funds internationally”, said Group Lease Public Limited (GL) Chairman/CEO Mitsuji Konoshita in a statement released after the deal.
CCF in a separate deal also disposed of its 28.1 percent stake held in BG Myanmar Microfinance Limited (BGMM) to GLH for a consideration of US $ 2.248 or Rs.330 million.
CCF said the deal has realized a gain on disposal of shares to the tune of Rs.277 million, demonstrating significantly higher valuations.
The 100 percent stake held in concert by BG Investments (Pvt.) Ltd and related companies along with CCF is valued at US $ 8.0 million.
In an earlier occasion BG group of companies controlled by CCF divested its71.9 percent stake in BGMM for an undisclosed amount.
The deals were completed just two days after the shareholders of GL, the parent company of GLH, which is listed in the Stock Exchange of Thailand, gave their green light for the company to go ahead with the two deals, among others.
On October 3, CCF announced that the company had signed two share purchase agreements (SPAs) to dispose of its 28.1 percent stake held in BGMM to GLH and also to sell 29.99 percent stake in CCF to the same buyer.
However, just days before the EGM on November 26, the Stock Exchange of Thailand (SET) warned the shareholders of GL on the multiple deals as they were both connected transactions and had been valued at significantly higher prices than the fair values of the shares.
In fact, Patrick GLPCL director Patrick Fisher is also the founder and managing partner of Creations Investment Sri Lanka LLC, one of the sellers of CCF shares. He is also a director of CCF.
However, the Board of Directors of GL thinks that the purchasing of shares in BGMM will enable them to expand their businesses into Cambodia, Laos, Myanmar and Vietnam region while the acquisition of CCF will give them an adequate foothold in the country’s burgeoning micro-finance business.
Post divestment, Egodage controlled BG Investments Private Limited and related parties now hold 51.5 percent stake in CCF still being the CCF’s controlling shareholder.
CCF operates with an asset base of Rs.76.5 billion and during the six months ended September 30, 2016, the CCF group made a net profit of Rs.1.37 billion or Rs.4.30 a share, an increase of 22 percent from a year ago.
Shares gain on foreign buying
REUTERS: Sri Lankan shares rose yesterday as a stake buy in Commercial Credit and Finance Plc by a unit of Thailand’s Group Lease Plc lifted the mood while foreign investors bought domestic stocks and turned net buyers so far in the year.
Group Lease Holdings Pte Ltd, a subsidiary of Thailand’s Group Lease Plc purchased 95.4 million shares or 29.99 percent in Commercial Credit And Finance Plc, Asia Securities, which was directly involved in the deal, said in a disclosure to the bourse.
The transaction was valued at Rs.10.59 billion ($71.31 million), according to a statement by Group Lease Holdings Pte Ltd.
Foreign investors bought a net Rs.11.7 billion ($78.79 million) worth of shares yesterday, reversing the year-to-date net foreign outflow to Rs.996.68 million worth of net investment in shares.
Turnover was Rs.12 billion, its highest since March 16, 2012, compared with this year’s daily average of Rs.748.9 million.
Shares of Commercial Credit and Finance Plc, however, ended 5.90 percent weaker. The Colombo stock index ended 0.17 percent at 6,337.82, edging up from its lowest close since Dec.2 hit on Wednesday. The bourse gained 1.17 percent last week, recording its first weekly gain in four weeks.
“It was a fairly dry year, but today’s trade will give a bit of confidence to the investors,” said Kanishka Perera Head of Research at Asia Securities.
“There could be a slight boost to the turnover levels in the coming days and this shows that still there is investor confidence in the market.”
The deal, according to brokers, is a positive as it assures investors of continuing foreign appetite towards Sri Lanka at a time of worries over the proposed increases in various taxes and fees affecting growth.
The government aims to boost its 2017 tax revenue by 27 percent to Rs.1.82 trillion year-on-year to meet a commitment given to the International Monetary Fund in return for a $1.5 billion loan in May.
Shares of conglomerate John Keells Holdings Plc rose 2.58 percent while Hemas Holdings Plc rose 2.08 percent.
