SG Holdings Global Plc Ltd, the overseas arm of SG Holdings of Japan which bought 30 percent stake in Expolanka Holdings PLC in a Rs.6.2 billion deal last Friday, has made a mandatory offer to acquire remaining Expolanka shares at Rs.10.70 per share.
The main shareholders of the company who collectively sold 30 percent of the company to SG Global have taken an undertaking to sell down their remaining shareholdings, if SG Holdings is unable to acquire 51 percent of the issued shares of the company through the offer.
Expolanka went public in 2011, issuing shares to the public at Rs.14 per share, to raise Rs.2.4 billion. However, the share issue was marred by controversy due to a highly contentious private placement the company had carried out prior to the listing at Rs.6 per share— less than twice the IPO price.
Managers to the issue, John Keells Capital defended the bloated IPO price claiming that the private placement was done at a time when the latest profit numbers of the company were not known.
Interestingly, parent company of John Keells Capital, John Keells Holdings was among the investors who had invested during the private placement.
Becoming the sixth largest shareholder of the company, JKH had bought 83.3 million shares of Expolanka, which amounted to 4.26 percent of the company’s issued shares.
Though managers defended the Expolanka issue price, the dismal performance of the Expolanka share in the Colombo bourse hardly justified it. Most of the stock brokerages, at the time, recommended Expolanka shares to investors as solid investment with long-term upside.
However, almost all of their profit forecasts for Expolanka for 2011 and 2012 by these brokers deviated considerably from the actual profit numbers of the company.
In the meantime, it appears that the mandatory offer by SG Holdings on Expolanka will give a good return to private investors who invested at Rs.6 per share and not to the public investors who invested in the company’s shares at Rs.14 in 2011.
Further, independent analysts claim that the price at which promoters of the company sold their shares to SG Holdings can be perceived as an extremely ‘good price,’ given the group’s net asset value per share remained at of Rs.5.20 at December 31, 2013.
Meanwhile, some analysts pointed out that the company could have fetched a better mandatory price for its shareholders if the promoters had not sold some of the subsidiary companies to related and non-related parties post-IPO, a move the company claimed was carried out to focus on its core business.