SEC probes On’ally Rights on UDA complaint against Renuka
The Securities and Exchange Commission (SEC) is probing the Rights Issue of On’ally Holdings (On’ally), which owns and manages the Unity Plaza Complex in Bambalapitiya, on a complaint made by On’ally’s major shareholder, the Urban Development Authority (UDA).
The preliminary inquiry was held on Wednesday.
The UDA (with 44.8 per cent) complained that Renuka Capital Plc (Renuka) had acted in concert with certain shareholders in acquiring the 5.4 million Rights Issue amounting to Rs. 90 million in 2019. The UDA is of the view that On’ally did not need a Rights Issue as it had Rs.600 million in deposits to renovate the space as the issue intended to.
On December 3, 2020 Renuka sold its 43.82 per cent to Lanka Realty Investments PLC at Rs.30.20 per share which is more than triple its original cost. Lanka Realty via a share swap with Renuka Capital disposed all Renuka’s shares and brought nearly 7 per cent from four other shareholders to total a 50.8 per cent stake. The total transaction cost was Rs.1.4 billion.
Sources close to this transaction told the Business Times that UDA at the time had informally agreed with Renuka not to take up the rights. “The complaint says that this was unethical and that Renuka diluted the company’s shareholding to get connected parties to buy On’ally shares,” one source told the Business Times. He said that Renuka acted in concert with connected parties to dilute On’ally’s shareholding and bought the rights to collectively become a 51 per cent major shareholder together with four others.
Renuka entered On’ally when it bought a 23 per cent stake at Rs. 43 per share three years ago from Ceylon and Foreign Trades Plc. Renuka in 2018 triggered the SEC Takeovers and Mergers Code when it increased its stake in On’ally to 35.3 per cent.
Now Lanka Realty has also triggered the SEC Takeovers and Mergers Code to acquire the balance minority shareholding at Rs. 30.20 per share. The Takeovers and Mergers Code was supposed to close on Christmas day but the SEC has agreed to extend this date on account of the investigation.
Lanka Realty’s biggest local shareholder is Joint Managing Director Hardy Jamaldeen, with a 15 per cent stake.