Strategic stakes to change hands in the CSE
More strategic share deals are expected at the Colombo Stock Exchange (CSE) in the coming months with added mergers and acquisitions (M and A) activity on the back of better sentiment and a slowdown in global equity markets, analysts say.
Increased activity in the equities markets is expected and more changing hands of large parcels in listed blue-chip firms are imminent, an analyst told the Business Times. “In a depressed market where valuations are low, M and A activities are on the rise with strategic stakes changing hands,” he said.
This was already displayed when on January 6, which was also the first major transaction for this year, (although not in Sri Lanka), LOLC said its subsidiary LOLC International Ltd of Singapore along with other minority shareholders of PRASAC Microfinance Institution Ltd of Cambodia entered into a Share Purchase Agreement and a Shareholders Agreement with Kookmin Bank, the largest commercial bank in South Korea for the sale of PRASAC’s entire shareholding of 70 per cent in a nearly Rs. 110 billion deal.
Three days later Malaysia’s sovereign fund Khazanah Nasional’s Broga Hill Investments Ltd sold its entire 10.8 per cent of John Keells Holdings (JKH) in a Rs. 22 billion deal to Citi Group’s Global Markets Ltd. This deal brought the daily turnover to a staggering Rs. 23.6 billion which is the second highest turnover next to the Japan’s Nippon Telegraph and Telephone Company (NTT) selling its 35.19 per cent stake of Sri Lanka Telecom (SLT) for Rs. 32 billion, the biggest ever single transaction in the Colombo Stock Exchange’s history.
Mauritius-based fund, Milford Ceylon Pvt Ltd (widely speculated as a front for a local firm), on Thursday bought Softlogic Life Insurance PLC’s 19 per cent stake amounting to 71.25 million shares which was acquired at Rs. 37 each for Rs. 2.6 billion from the seller, DEG or State Street Munich C/o SSBT-DEG-Deutsche Investitions-UND Entwicklungsgesellschaf MBH.
Thursday also saw Singhe Hospitals’ third largest shareholder, T. M. P. Tennakoon sell his 9.8 per cent just before the market closed. He sold 42,271,530 shares at Rs. 160 and the buyer is a local party, analysts said.
Many analysts say that there is more to come. “More substantial stakes in possibly blue-chip counters will change hands,” an analyst told the Business Times. The buyers of those holdings will be a combination of both local and foreigners, he added.
Global insurance players are eyeing local insurers, another analyst said noting that at least two insurance firms are for sale, while many foreign and local buyers are setting the stage for consolidation in this sector. Insurance sector has seen many deals in the past four years and this year will see much consolidation, analysts predict.