In one of the largest related party deals in the Colombo Stock Exchange, Janashakthi PLC, the investment arm of Sri Lanka’s Schaffter family controlled businesses yesterday bought 31.14 percent stake in Dunamis Capital PLC, another firm controlled by the same family for Rs.1.4 billion as the group is bringing its different businesses under one umbrella.
Janashakthi PLC bought a total of 38.3 million shares of Dunamis Capital from Next Ventures Limited and Dinesh Schaffter who held 19.2 million and 19.05 million shares respectively at Rs.36.60 a share.
It appears that the deal has gone at a substantial premium to the trading price of the Dunamis share.
Dunamis Capital share ended at Rs.35.10 at yesterday’s close which was Rs.16.60 or 89.73 percent higher.
With the acquisition of shares, Janashakthi PLC now holds 50.6 million shares or 41.14 percent stake in Dunamis Capital.
Even after the yesterday’s deal, Dinesh Schaffter still has 26.25 percent stake in Dunamis Capital being the second largest shareholder in the company after Janashakthi PLC.
Hinting on possible mergers and acquisitions in the future, Janashakthi PLC Chief Executive Officer, Ramesh Schaffter said the deal would become a good springboard for a range of other strategic alliances in the future.
“The transaction will function as a launch pad for a range of strategic partnerships in future, which the company is confident it will attract, given its current structure and growth prospects”, he said in a statement issued after the deal.
In a separate disclosure, Janashakthi PLC said the company would make a mandatory offer to purchase the remaining shares of the company as yesterday’s acquisition of shares breached the single shareholder limit of 29.9 percent one party could hold without offering to buy the remaining shares.
Janashakthi PLC said they are looking at absolute control over Dunamis Capital with over 90 percent stake in the latter after the end of the mandatory offer period.
They expect Dinesh Schaffter and Manjula Mathews who together controls another 47.85 percent in Dunamis Capital will accept the mandatory offer.
Dunamis Capital controls its two subsidiaries, First Capital PLC, a fully fledged investment bank and Kelsey Developments PLC, a property developer.
After the mandatory offer, Dunamis Capital will become a subsidiary of Janashakthi PLC and the First Capital and Kelsey Development will become sub-subsidiaries.
For the quarter ended in June 30, 2018, Dunamis Capital reported a net loss of Rs.201.1 million compared to the net profit of Rs.163.7 million in the same period in 2017.
Yesterday’s deal plus the sale of the general insurance arm of the Janashakthi Insurance in a blockbuster deal in February this year mark the attempts by the Schaffter family to build a leading financial services conglomerate under the umbrella of Janashakthi PLC consisting of insurance, investment banking, asset management, stock brokering and non-banking finance companies.
In February 2018 Janashakthi Insurance sold its fully owned general insurance subsidiary, Janashakthi General Insurance Limited to the local unit of the German insurer, Allianz S.E. for a mammoth Rs.16.4 billion with a gain of Rs.7.08 billion to the group.