HNB and related parties snub DFCC Rights Issue at EGM
Banking circles are dismayed and disappointed over Hatton National Bank (HNB) and related parties snubbing fellow DFCC Bank’s capital raising exercise at Wednesday’s Extra Ordinary General Meeting (EGM).
DFCC’s Rs. 6 billion Rights Issue was passed at the EGM with votes by the Bank of Ceylon (BOC), Sri Lanka Insurance Corporation (SLIC), Employer’s Trust Fund (ETF), and National Savings Bank (NSB).
HNB with 15 per cent in DFCC, top businessman Harry Jayawardena with 8 per cent, and investor M.A. Yaseen with 10 per cent were against the resolution to approve the Rights. DFCC said the objective of the Rights issue is to increase the Tier 1 capital of the bank to accommodate and support the bank’s future business expansion plans. Major shareholders of DFCC Bank are HNB, BOC (12.5 per cent), M.A. Yaseen, SLIC (9 per cent), AEPF (8 per cent), Melstacorp (7.3 per cent), and Seafeld International (5.8 per cent).
The resolution to approve the Rights was passed with 54 voting in favour and 45 against out of proxies received.
Without this capital, DFCC cannot sustain and industry officials were alarmed at how blatantly the smaller entity was exposed to be at the mercy of larger shareholders so they can make a bid for DFCC.
The advantage of purchasing shares on the rights issue is that investors will get chunks of the bank which will otherwise not be possible.
This action by HNB and Mr. Jayawardena related parties mirrors what took place 21 years ago when they tried to control Sampath Bank – through the HNB where he failed after a long process that included court action. That was mainly due to unions resisting the takeover bid.
Four shareholders, SLIC, HNB, Distilleries Co, and Readywear Industries called an extraordinary meeting on November 2, 2008, seven years after the bid on Sampath, seeking to remove then Commercial Bank Chairman Mahendra Amarasuriya from his post but wasn’t successful following an Appeal Court ruling.
The Appeal Court declared that his (Mr. Jayawardena’s) majority shareholding would be restricted to 10 per cent (voting rights) until a pending case over the dispute was over. In a three-year-old case filed in October 2005, unions representing the Association of Commercial Bank Executives and the Ceylon Bank Employees Union, fiercely objected to Mr. Jayawardena’s takeover attempt saying that – among other things – ‘DFCC with a 29.5 per cent shareholding in Commercial Bank is the single largest shareholder making the latter bank vulnerable to the predatory strategies of the Stassens/HNB Group’.
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