Tensions in the nearly 18-year relationship between Jetwing Hotels Plc's (Jetwing) and Hayleys PLC have surfaced with Jetwing’s recent purchase of a 7% stake in Lighthouse Hotels Plc (LHL), controlled by both these parties.
This transaction has raised some pertinent questions as whether this was done to ward off Hayleys Director Dhammika Perera’s interest in LHL through Hayleys, some industry analysts noted.
Mr. Perera, a businessman and also the chairman of the Board of Investment, who owns hotels through the Connaissance Group which he controls, has a more than 20 % stake in Hayleys.
Analysts said there have been some tensions in the relationship between Hayleys and Jetwing as the Hayleys board during the last few months has decided that the long relationship between the two entities should be changed. “Hayleys had so far been a passive investor and let Jetwing manage the hotels. They felt that Hayleys wanted greater involvement and a greater stake in the properties. They felt that this way there will be greater control,” an analyst said. He said as Hayleys wanted greater control, some directors at Hayleys suggested buying more stakes in LHL.
He said that Jetwing was aware of the way their relationship with Hayleys had strained.
“Some concern on Hayleys side surfaced when De Zoysa family owning Associated Electricals Corporation (AEC), being friends of Jetwing, had bought a three percent holding on LHL last Thursday at Rs. 50 per share," the analyst said.
He said Chemanex’s seven percent in LHL was sold to Jetwing on Monday in two parcels at Rs. 60.50 per share. Jetwing now owns 34% in LHL and if AEC is a “friendly party’ that would provide nearly 38% control, he said.
When asked about this deal, Hiran Cooray, Managing Director Jetwing told The Sunday Times FT that Jetwing has been working together with Hayleys with regard to LHL for the last 15 years.
"We started this hotel together with Hayleys and Chemanex. When Chemanex offered to sell their shares to both Jetwing and Hayleys sometime ago, Hayleys were not interested. So we bought the shares when this opportunity came our way again,” he said. However, analysts said that the transactions could deepen the tensions between Jetwing and Hayleys.
When asked about the transaction, Richard Ebell, Director Hayleys said, "Hayleys has 27% in LHL. Hayleys and Jetwing made a declaration to the Securities and Exchange Commission (SEC) five years ago saying the two entities are acting in conjunction to make further purchases on LHL."
As such he said there will not be a triggering of a mandatory offer, which the SEC has accepted. Mr. Cooray also confirmed this. “We entered into this agreement in 2003 and sent it to the SEC. As such any purchase that is done on LHL by the two parties will not trigger a mandatory offer,” he said.
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