Apollo ownership battle continues
Independent advisors recommend mandatory offer
By Ashwin Hemmathagama

Independent Advisors have recently given their recommendation on the mandatory offer made by the Sri Lanka Insurance Corporation Ltd. (SLIC) to the shareholders of the Lanka Hospitals Corporation Ltd. (LHCL) is also known as the Apollo Hospital Colombo.

According to this special audit carried-out by the BDO Burah Hathy Charted Accountants on the financial statements and the valuation of the ordinary shares of the LHCL has turned out to be an attractive offer for the existing shareholders.

"At the request of the Board of Directors, we have carried out our examination for the purpose of providing an independent advisors’ report as set out in the rules contained in the Takeovers and Mergers Code 1995 as mentioned in 2003, by the Securities Exchange Commission of Sri Lanka. Therefore, in our opinion it is our view that the price per share of Rs. 28/- offered to the shareholders in respect of ordinary shares is an attractive offer. The market price has behaved above the offer price only after July 19, 2006, which could have been triggered from the SLICs’ increased holdings," the Charted Accountants stated.

The results of different types of valuation approaches; Price to Earnings Ratio (PER) Rs. 0.33, Price to Book Value (PBV) Rs. 16.25, market price analysis (eight months simple average) Rs. 20.75, and net asset value approach Rs. 7.14 are below the price per share as per the offer document.

Ensuring the mandatory offer to be 100 per cent success, the SLIC top official yesterday told The Island Financial Review that institutional shareholders will make the difference. "We have seen this independent advisors’ report on the Lanka Hospitals Corporation Ltd. They have covered almost all aspects before reaching the recommendation. Though some individual shareholders do not understand what is going on we believe that institutional shareholders would make the move. We believe that it is better to operate this hospital differently which would ensure more returns to the shareholders," the source added.

According to the Independent Advisors’ report, it is important to note that, the price of LHCL has equated or crossed the offer price in the past only in two occasions, namely on October 7, 2005 days’ high of Rs. 29/- and on November 16, 2005 days’ high of Rs. 28/-.

Thereafter the price has reached the level of Rs. 28/- per share only on July 20, 2006 the day on which the offeror increased the holding up to 36.1 per cent of LHCL. After this date the price has hit high on July 2006 of Rs. 34.50. The all time highest recorded is Rs. 36.50 on July 21, 2006.



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