Financial Times

Harry J vs Mahendra A battle enters final phase
Commercial Bank drama at Holiday Inn
By Duruthu Edirimuni
Sri Lanka’s business community is preparing for probably the biggest clash of two powerful individuals this week as Harry Jayawardena flexes his muscles to oust Mahendra Amarasuriya from the Commercial Bank board on Wednesday.
The Sri Lanka Insurance Corporation and Distilleries Co, both controlled by Jayawardena, requested an Extraordinary General Meeting (EGM) to remove Amarasuriya, who has served as a director for 19 years, from the directorate. No reasons have been given in the notice calling a meeting, an issue that was raised by one of the petitions challenging Jayawardena.

However the move is essentially aimed at Jayawardena taking control of the bank and adding to his direct or indirect control of HNB and DFCC. With proxies changing hands and shareholders preparing for a “rousing” battle at Holiday Inn which would probably host the biggest-ever meeting of shareholders in recent times, Amarasuriya’s cause was taken up by unions and shareholders with three petitions being filed separately in the District Court, High Court and Appeal Court seeking an order for the Central Bank to reduce the DFCC’s 30 percent stake in Commercial Bank.

Lawyers for petitions opposing Jayawardena urged court to issue an order limiting the DFCC stake to the maximum 10 percent permitted for any individual under the Banking Act while Jayawardena’s lawyers argued that the DFCC stake came before the Banking Act was amended.

Jayawardena directly controls 40 percent of the bank through various parties, mostly institutions, while Amarasuriya’s support comes from mostly individual shareholders. The drama has seen top personalities in the business community lending their support to both parties.

With things hotting up amidst a media blitz on the issues confronting stakeholders of the bank, Jayawardena’s companies also placed advertisements in national newspapers accusing unnamed sections of the media of false statements and threatening to sue these institutions.“This will be another Sampath Bank for Jayawardena,” a stock analyst said, adding that three court cases questioning Jayawardena’s share ownership was enough proof that people still have faith in the legal system in the country.

Both the Central Bank and the Securities and Exchange Commission (SEC) have held with Jayawardena saying there were no problems in the shareholdings. The Commercial Bank share closed at Rs.163.75 on Friday, slightly up against Rs.161.25 the previous Friday.

Although this cannot be considered a hostile takeover since DFCC is the biggest shareholder, some analysts are likening this battle to the hostile takeover battles the Colombo stock market has seen in recent years including Dr Sena Yaddehige’s takeover of the Richard Peiris group and the ousting of its founding Peiris family, Harry Jayawardena’s previous unsuccessful attempt to control Sampath Bank, and Jayawardena seizing control of the Aitken Spence conglomerate.

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