- Buys 74% of Capital Alliance Finance for over Rs. 400 m via Colombo Bourse
Cargills Bank Ltd. yesterday became the first bank to conclude an acquisition of a finance company under the Government-initiated and Central Bank facilitated financial sector consolidation.
The latest entrant to commercial banking, Cargills Bank bought 73.39% stake in Capital Alliance Finance PLC (CALF) for over Rs. 400 million. The bulk of the stake or 21.22 million shares were done at Rs. 15.50 each and a further block of 5.3 million at shares Rs. 15.40 each. These deals worth Rs. 410 million for 68.43% were done via crossing. The seller was Capital Alliance Holdings Ltd.
Cargills bought a further 5% stake from the market. Cargills Bank Ltd. will make the Mandatory Offer for the remaining shares of CALF as required by the Takeovers and Mergers Code 1995 (as amended), in due course.
Analysts said though few banks have announced plans to acquire or have signed MoUs to buy a finance company the Cargills Bank-CALF was the first concluded deal. The fact that CALF was a listed entity made the process easier following a due diligence.
The share price of CALF finished the day at Rs. 15.50, up by 30 cents whilst it an intra-day high of Rs. 15.90.
CALF’s 52-week highest price was Rs. 18.70 achieved in the quarter ended 31 March 2014 before closing at Rs. 14.60. Its net asset per share is Rs. 8.18.
As per shareholding of CALF as at 31 March 2014, apart from Capital Alliance Holdings, other major shareholders were Lankem Ceylon PLC (9%) and Divasa Equity (4.66%) and HVA Lanka Exports (2.695). Public shareholding was 31.57%.
For some of the directors of CALF, it was the second sale of control of finance companies. On Monday, they were involved in the sale of 96% stake in Trade and Finance Investments (TFI) to Commercial Credit for Rs. 1.5 billion, at double the net asset value.
Both companies had been well managed whilst CALF was much smaller in size. It had assets worth Rs. 1.25 billion and liabilities of Rs. 945 million. Capital and reserves amounted to Rs. 317 million. It finished FY14 with a loss of Rs. 8 million as against a profit of Rs. 7 million in the previous year. Its net operating income was Rs. 57.65 million, down from Rs. 69.7 million.
TFI on the other had assets worth Rs. 1.7 billion (of which loans and receivables amounted to Rs. 1.16 billion) and liabilities amounted to Rs. 877 million of which customer deposits amounted to Rs. 778 million. Equity amounted to Rs. 793 million including Rs. 441 million in retained earnings.
In FY14, the company posted a net profit of Rs. 166 million, up from Rs. 129.6 million. Income was Rs. 418 million, as against Rs. 294 million in FY13.