Financial Times

Former Asian Hotels management team to quit
Nick Clayton, Viren Perera and Thilan Wijesinghe, the former management team of Asian Hotels Corp, which was acquired by the John Keells conglomerate, have decided to leave the firm and pursue their own interests but would stay for a temporary period to ensure a smooth hand over.

The trio, engaged by the former owners led by Tan Sri Wan Azmi Hamzah and David Crichton-Watt, announced they had decided to move on to pursue "other entrepreneurial challenges". However, in the interests of ensuring a smooth and efficient management hand over, the team will work closely with JKH for the next three months.

"Though brief discussions were held between the team and JKH to explore the possibility of continuing to work together, the team made their decision to move on on the basis that they had satisfactorily achieved their primary objectives of enhancing shareholder value and facilitating the controlling shareholders' exit," the team said in a statement.

John Keells recently acquired a controlling stake in Asian Hotels by paying Rs. 30 per share for a 35 percent stake held by the former owners and have been mopping up smaller parcels ahead of a mandatory offer to minority shareholders.

Full ownership of Asian Hotels, which owns the Colombo Plaza hotel and the Crescat City Complex is a big shareholder in Trans Asia Hotels, which is expected to cost JKH about Rs 6.6 billion. At the time the former management team took office in June 2002, Asian Hotels was trading at Rs. 7.25.

In the 15 months since, shareholder value has more than quadrupled, while quarterly profitability has increased, as the first quarter ended in June 30, 2003, from Rs. 6.4 million in the previous year to Rs. 107.2 million, the statement by the former management team said.

The announced merger between Asian Hotels and Crescat Developments Ltd, the successful early termination of the management contract with Oberoi and the ensuing return to profitability of The Colombo Plaza, as well as the increased rate of apartment sales were key factors that improved profits and share prices.

"It is natural to move on - our background is entrepreneurial," said Perera.
JKH's takeover of Asian Hotels indicates the stock market is now driven by domestic investor confidence, he said.

Asked why the former owners decided to sell out just when the tourist industry was enjoying a boom, Perera said Azmi decided to exit after a bypass operation two years ago. "He decided to change his life goals and become more of a portfolio investor and not sit on company boards."

Clayton said the former owners thought the price they got "reflected any assumption of a tourism boom". He also pointed out that it was not easy to sell a 35 percent stake in the market. However, "in dollar terms they lost a bit," he added.
Wijesinghe said Azmi had "not shut the door on Sri Lanka and will be interested in looking at other opportunities."

The fact that a local firm had "taken a huge bet on peace" has got a "lot of other prospective investors thinking of investing here - they appear to have accelerated their plans," he said. JKH acquired control of Asian Hotels at a valuation much cheaper than the refurbishment cost, he said.

Susantha Ratnayake, JKH's joint managing director who has taken charge of the Asian Hotels operation, said he believes there is huge potential in the city hotels and as well as the prime Colpetty property. JKH was continuing talks with CentrePoint, a leading property developer in Singapore, he said.

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