Was Friday’s announcement by John Keells Holdings, one of the country’s richest business conglomerates of a one for five rights issue sweetened by a one for seven bonus to follow targeting its lead shareholder who will now be required to raise billions of rupees to take up his rights and maintain his percentage if he wishes to do so?

This was the question buzzing in business circles which was stoutly rejected by JKH Chairman/CEO Susantha Ratnayake who denied any such motives stressing that the move, which he said was not underwritten by anybody, was purely intended to infuse a massive Rs. 12.9 billion into the company.

Mr. Sohli Captain and connected parties owning/controlling around 20% of JKH, will have to raise some serious cash if they are to take up their rights and maintain their percentage, analysts said.

Retired JKH Chairman Ken Balendra, who together with his wife owns a substantial slice of the company, said yesterday that he considered the move by his successors a good one and he would take up his rights raising the necessary money by pledging some of the shares owned by his family.

``JKH has traditionally taken good care of its shareholders and given them value for money,’’ he said. ``Getting the new cash will help the debt : equity numbers and it is likely that the boys have something big in the pipeline.’’

While Ratnayake said that only a simple majority of shares is required to endorse the directors rights/bonus proposal, with the rights priced at Rs. 140 per share (inclusive of a Rs. 130 premium), he agreed that a major shareholder voting against the move would be a negative even though the motion is carried.

Analysts believe that JKH whose executive directors are substantial shareholders – Ratnayake owns slightly over 2 million shares, Deputy Chairman Ajith Gunawardene over 2.5 million and Sumithra Gunasekera over 0.9 million with these directors also having large tranches of share options – will themselves have to raise some big money to take up their rights.

``But it percentage terms, unlike Balendra, none of the directors are on the list of top 20 shareholders,’’ an analyst noted. ``They would have no interest in maintaining a percentage and can, if they wish raise the money they need by selling off part of their holdings at present market price which is much higher than the rights price.

``Borrowing against their shares is also an option that all big shareholders enjoy.’’

JKH traded last week at Rs. 195 a ten-rupee share, dipping slightly to 194.50 at close of trading on Friday when the directors took the rights/bonus decision and communicated it to the market after trading closed.

Knowledgeable business circles are aware that the JKH board would prefer no individual interest or group acquiring a 25% stake which would make it possible for them to block any special resolution. They say that such acquisition will affect the present liquidity of the share, a proposition rebutted by others.

The Captain owned/influenced interests comprising Mr. Sohli Captain who according to the last annual report of JKH was its single largest shareholder with 12.52% and companies/family/associate are approaching this 25% plateau and have in recent weeks being buying at the Rs. 195 price.

Captain is out of the company at present but his son, Rusi, has been in contact with the JKH hierarchy (both past and present) following Friday’s announcement. Analysts said that the Captain interest – two Captains and two companies controlled by them are in the top 20 shareholders list – together with the late Mr. Ajith de Fonseka, the third biggest shareholder behind Captain and Mr. Raj Rajaratnam, who on his own account and the Galleon Fund with which he is associated are also in the top 20, have a collective 20% or more..

Fonseka, a very close associate of Captain, was a co-owner of the Paints and General Industries Group founded by Captain.

Ratnayake said that he would be taking up his own rights. It is expected that JKH’s other executive directors would do likewise.

While JKH had independent non-executive directors on its board, they are very highly paid in Sri Lankan terms getting a monthly pay cheque of Rs. 100,000 each, way above what other blue chips pay non-working directors on their boards.

``In that context, whether they are able to resist proposals strongly urged by the executive directors come into question,’’ one analyst said.

In making its announcement on Friday JKH said that it has ``recently made substantial investments, including acquisition of two hotel properties in the Maldives, the construction of a new hotel in the Maldives, the construction of the second apartment complex - ``The Emperor’’ (on the old Oberoi hotel grounds), the setting of a business process outsourcing (BPO) company and the purchase of an additional stake in South Asia Gateway Terminals (Pvt) Ltd.