SEC D-G explains conflict of interest issue raised
Reckitt’s Rs. 38 per share offer to minority too low, says shareholder

A shareholder of Reckitt Benckiser (Lanka) Limited, has complained to the Securities & Exchange Commission of Sri Lanka that the Rs. 38 per share offer to minority shareholders consequent to the proposed de-listing of the company’s shares is wholly inadequate.

The SEC’s Director General Dr. Dayanath Jayasuriya, said that the commission has not yet received any de-listing application and representations made would be considered once such an application is received.

Reckitts have already announced their decision to de-list and indicated that the minority shareholders would be offered Rs. 38 per share on their holdings.

Mr. K. Ariaratnam, a shareholder of the company, has said that any de-listing "will put into serious difficulty those shareholders who are not willing to part with their shares at this low price of Rs. 38 only."

He said that if any shareholder wished to sell after de-listing because of a need to raise some money, "they will not be able to find a willing buyer at a competitive price in the open market since the shares remained de-listed."

"You will appreciate that the present holders of the shares bought same at some time or other at competitive prices in the open market at the stock exchange," he has told the SEC.

Ariaratnam, a chartered accountant who once ran the share department of John Keells, has also pointed out in his letter that Reckitts land and buildings had been re-valued as long ago as November 1964. He points out that the company had in its last annual report stated the carrying value of property, plant and equipment at Rs. 220.2 million. But he says that this figure does not include the value of the land which would have appreciated substantially since 1964.

Ariaratnam has also urged that there should be a brand value of all "the market leading products" of the company which should be factored into pricing the shares.

"The branded products have been developed in Sri Lanka utilising the funds of the company which would otherwise have been available for distribution as dividends to all the shareholders. Therefore, to this extent the minority shareholders’ value has to be enhanced."

He says that an arbitrary price of Rs. 38 per share decided by the Reckitt’s directors is not acceptable.

Ariaratnam has also raised the position of about what he calls "a serious conflict of interest" of Mr. G. C. B. Wijeyesinghe being a non-executive director of the company and a member of the SEC.

He says that Wijeyesinghe had presumably voted for the de-listing of the shares by the parent company, Reckitt Benckiser Plc of the United Kingdom.

SEC Director General Jayasuriya explained that the SEC Act took care of such problems by requiring any conflict of interest to be declared by a concerned members of the council. Such members are de-barred fromt participating in discussions or decisions in areas of conflict.

This practice has always been followed, Jayasuriya said.

Ariaratnam has also cautioned that if the SEC does not act meaningfully in the Reckitt’s matter, many other multinationals whose shares are quoted on the stock exchange may follow suit.

He has pointed out that the instant case is different to a mandatory offer made with no de-listing involved.