The sale of 90% of Sevanagala Sugar Industries Ltd (SSIL) to Daya Apparel Export (Pvt) Ltd for Rs 550 mn was concluded on Thursday at the Treasury. The government proposes to gift 10% of the shares to employees.

The sale agreement was signed by the Secretary to the Treasury Charitha Ratwatte and Daya Gamage, chairman, Daya Apparel Exports, after which the full purchase consideration was paid to the government.

The sale agreement includes clauses that ensure continuation of employment of all permanent employees on terms and conditions no less favourable than those existing as at date as well as continuation of existing benefits to farmers. It also requires Daya Apparel to offer to purchase all shares gifted to employees at the price paid for the 90% shares. The buyer also agreed to transfer Rs 64 mn out of the cash balance of SSIL into a Gratuity Trust Fund for employees of Sevanagala.

The sale was advertised in the local press during the period February 17-20. The closing date for submission of proposals was on March 27. PERC received four bids by the closing date.

The bids were opened on the closing date in the presence of representatives of the parties who had submitted bids. Bid prices were announced. The following are the prices offered by each party:—

Seasongrow Holdings Ltd. Rs. 762,300,000, Daya Apparel Exports (Pvt) Ltd. Xiangnan Luo Rs. 550,000,0OO, Distilleries Company of Sri Lanka Ltd. (DCSL) Rs. 451,270,000, and Master Divers (Pvt.) Ltd. Rs. 78,135,750

The bids submitted by DCSL and Master Divers conformed to the requirements of the Request For Proposal (RFP) document issued by PERC which set out company information, bidding procedure and draft contracts.

Seasongrow Holdings Pvt. Ltd. did not submit a bid bond as required and proposed a payment scheme that envisaged an actual payment of only Rs. 50 million at the time of signing the agreement.

The payment of Rs. 57 mn is a liability of SSIL that has to be borne by SSIL irrespective of the sale and cannot be taken in to account. Also deferred payment was not acceptable.

Daya Apparel/Xiangnan Luo submitted a proposal with a bid bond subject to a deferred payment of the purchase consideration as stipulated below.

The Technical Evaluation Committee (TEC) appointed by the Secretary to the Treasury requested PERC to inform Seasongrow and Daya Apparel to resubmit the bids in conformity with the terms of the RFP within seven days. The letters said that purchase consideration must be paid upfront and that the bid must be submitted with a bid bond.

Seasongrow agreed to submit a bid bond for Rs 76.23 mn although they were specifically requested to furnish a bid bond with the bid. They also agreed to pay two instalments of Rs 180 mn each at the end of the first and second year. The conditions relating to payment of tax liability and withdrawal of SSIL funds remained.

Daya Apparel/Xiangnan Luo informed PERC that they agreed to pay the total purchase consideration of Rs. 550 million upfront. Considering the above, the following recommendations were made by the TEC.

To reject the bid submitted by Seasongrow since they have not complied with the requirements of the RFP in terms of submission of bid bond and upfront payment of purchase consideration.

To accept the bid offered by Daya Apparel since it was the highest valid bid and to reject the bids submitted by DCSL and Master Divers since the prices offered by them were lower than the price offered by Daya Apparel.

A cabinet paper was submitted on May 8 inline with the recommendation made by the TEC. The Cabinet of Ministers granted approval for the sale to Daya Apparel on June 6. (Press Release)

Seasongrow Bid. Rs. Mn

Up front payment 50

Payable within three years 375

425

Government to withdraw cash from Sevanagala 268

Seasongrow to pay SSIL tax liability 57

Total purchase consideration as per bid 762.3

Rs Mn

Upon signing the agreement 100

Within two years 450