Financial Times

Misty Mountain-HVA deal delayed
By Duruthu Edirimuni
Doubts have emerged over the acquisition of branded tea exporter HVA Lanka by a relatively unknown company with American interests called Misty Mountain Holdings (MMH), which burst into the limelight recently with sudden announcements of plans to buy Sri Lankan tea firms.

The Sunday Times FT learns that MMH, which is also in talks with John Keells Holdings (JKH) and Hayleys conglomerates on acquiring tea plantations companies and leasing estates, has failed to pay the initial funds to acquire HVA Lanka, which sells under the Heladiv brand name.

Top officials at John Keells and Hayleys confirmed they are in discussions with MMH. MMH has cited election related uncertainties for its delay in paying the money and HVA last week was negotiating a fresh deadline with MMH to mutually agree on a cut-off date.

MMH chairman Allen Lipscomb, an American, refused to say where his money was coming from to buy HVA and Namunukula, although he did confirm reports from stockbrokers that he was considering an Initial Public Offering to raise funds.

Lipscomb apparently approached a stockbroker for an IPO but the firm did not take it up since he has not come up with proper financial data. "It is my business," he replied when asked about the source of funds to buy HVA and KPMS.

A spokesman for HVA said Lipscomb was asked to pay at least Rs. 120 million by April 4 to HVA, out of the agreed amount of Rs. 300 million, which corresponds to 60 percent of HVA.

Lipscomb said that HVA is a "unique situation" and that they were looking at specific kinds of contingencies and situations associated with it. "We slowed down our progress because of the elections and that extra time we had has allowed us to put everything into perspective."

He said the contract MMH signed with HVA stipulated a number of contingencies and the national elections was one of them. "We have a right for an extension due to the national election and gave HVA a chance to agree to an extension which they ignored," Lipscomb said.

He said that MMH has given HVA another deadline, which ends today (Sunday). The HVA spokesman said that HVA does not see 'elections' as a valid reason to extend the deadline for payment. He said that there is a specific performance clause in the contract and that MMH was given enough time to pay up.

Lipscomb said that if the HVA deal does not go through, they can strike a deal with other companies with production facilities in Colombo who had approached them.

"If HVA does not agree for an extension, we will consider it null and void and that HVA has defaulted," he added. However, HVA sees it differently. "We will have to resort to legal action if the second extension for payment is not mutually agreed," the HVA spokesman told The Sunday Times FT.

MMH was incorporated two and a half years ago with the sole purpose of acquiring tea-producing properties in Sri Lanka and building a tea brand, Lipscomb explained.

The majority shareholders of MMH are Sri Lankan while other shareholders are from Canada, UK, US and Hong Kong. Environmentalist Ranil Senanayake is a director of MMH.

MMH is also trying to buy a 58.75 percent stake in Namunukula Plantations Ltd., (NPL) under Keells Plantation Management Services (Pvt) Ltd., (KPMS) for Rs. 400 million.

JKH said in a statement last month that they have entered into a Sale and Purchase agreement with MMH whereby the latter will conduct a due diligence of NPL with the intention of purchasing KPMS after 65 days.

The due diligence is not over yet and MMH is expected to decide by end of May whether or not it will buy KPMS. Lipscomb has maintained MMH is buying KPMS and that reports of the due diligence will be ready within a few days.

A top official at JKH said the conglomerate is in discussions with MMH and three more companies and said a due diligence is still being carried out by MMH.

He said the conglomerate is in no hurry to sell a majority stake in Namunukula, which has six estates, but will dispose of it at the right price. Lipscomb also has entered into a Memorandum of Understanding (MoU) with the Hayleys group on a sub leasing agreement of three estates of the Talawakele plantations owned by Hayleys Plantations Services.

Hayleys sources said the MoU stipulates approximately Rs. 45 million as a down payment and an annual lease rental. This deal is awaiting approval from the Treasury and Ministry of Plantation Industries.

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