The transfer of the controlling interest of the family controlled, publicly listed, manufacturing and trading company, Associated Motorways Ltd. (AMW) is perhaps the most significant event that has happened in the the Sri Lankan corporate scene in recent years.

It is the first take-over of this magnitude by a Middle Eastern group. Such an example counts. It paves the way for other investors from a region that is awash with billions of petro-dollars to examine directly investing in the Sri Lankan corporate sector, and the economy more generally. In ten years time, the take-over of AMW may well be considered a true seminal moment similar to the setting up of the first garment factories by foreign interests in Sri Lanka some …. . years ago.

The skeptics questioning the benefits of the burgeoning garment industry were confounded in the course of time as the standard of living of hundreds of thousands of Sri Lankans improved directly or indirectly.

The purpose of this article, however, is not to speculate on the potential for the future of the change of ownership of AMW. Rather, it is to sketch the development of AMW over the years to become a major quoted company in Sri Lanka; and the role of the leadership that made this achievement possible.

It was in 1988, when I was still a partner of my audit firm, Hulugalle Wikramanayake & Co and a financial advisor to Upali Group, that I met Chulaka De Zoysa on the golf course. He had just returned from a trip to the USA including a visit to the headquarters of the World Bank headquarters where a close friend, who was also a relative, was employed. He was brimming with ideas gained from his trip. I recall him telling me on that occasion how an excellent system of roads would transform Sri Lanka`s development prospects. He said that with a North South highway, the journey between Colombo and Jaffna would take only three hours. The spin-off of building such a highway in terms of economic development and job creation, he felt, would reduce if not totally eliminate the bitterness between ethnic groups. He was hoping to interest President Jayewardene in the highway proposal because it was the sort of project the World Bank and donor countries might be willing to finance. Unfortunately it never got off the ground. The consequences have been dire.

At that time Chulaka De Zoyza was finding it hard to make AMW, which he controlled, a profitable enterprise. He had been at school with Upali Wijewardene. I met him on several occasions when he came to see Upali. We often discussed matters relating to the commercial world. In due course he invited me to join the Board of AMW to assist with financial and accountancy information and advice. Thus began a pleasing association for the past two decades both with the firm and family members who had a controlling interest in the company and managed its affairs.

Associated Motorways was started by Sir Cyril De Zoysa when he was the Chairman of South Western Bus Co. Ltd which was owned by the bus operators of the South Western region of Sri Lanka. He invited

other bus companies to become shareholders of AMW with him. The objective was to provide a service to the shareholding bus magnates by supplying imported spare parts for the buses and rebuilding tyres. The new firm also obtained the agency for British Leyland , a company in the UK that manufactured buses. When the company was formed the principal shareholders in addition to Sir Cyril de Zoysa were owners of bus companies like the Madanayake’s, (MJ Bus Co), the B.J.Fernando family (BJF Bus Co} and Sir Leo Fernando’s family.

The company was initially involved in tyre retreading using rubber. It soon diversified into the production of bicycle tyres. Right from the inception of the firm the policy was to enter into joint ventures with firms abroad that could provide knowledge, technology and experience in the areas AMW wished to be involved. The first joint venture of Innoue Rubber Co. Ltd., a big Japanese enterprise in moulded rubber products, was with AMW as a partner in Associated Rubber Industries Ltd. AMW set up another joint venture with Yuasa battery Co of Japan to manufacture automobile batteries. It had also joined with Vacu-lug Co. Ltd. of UK to rebuild giant off - road tyres.

The company business model also involved the establishment of associated companies with other shareholders. AMW started manufacturing cables through Associated Cables Ltd. Associated Electrical Corporation was an AMW associate company promoted to help M.P.Wijesinghe, a brilliant Engineer, who had designed a refrigerator to be manufactured by the company. In due course Ajita De Zoysa joined Associated Electrical Corporation and arranged for it to be quite independent of AMW.

After 1978 the Sri Lanka economy was gradually liberalized. With deregulation of imports some of the industries established by AMW could not compete with imported products. AMW had to adapt to the new situation. Attention was shifted towards importing motor vehicles. AMW with their motor connections in Japan obtained the Nissan and Yamaha agencies. With the Japanese improving on their European competitors in the car industry, Japanese vehicles became popular in Sri Lanka both for reasons of price and quality. The division of AMW dealing with imported agency products soon became profitable.

When Chulaka De Zoysa took over the reins of AMW in 1987, there were strikes in the loss making manufacturing subsidiaries and associated companies. Consequently, AMW had great difficulty in meeting its financial commitments. The Chairman’s forte was mechanical and production engineering as he had majored in these subjects at Loughborough University. He thus had good technical ability. He also had foresight. But he was less well versed in business administration, an area that mattered much more in an open economy than the previous closed economy when AMW industries were established.

Mr V.T.De Zoysa, the younger brother of Sir Cyril de Zoysa, managed Sir Cyril`s companies when he was elected President of the Senate. After the demise of Sir Cyril in 1978, Mr V.T.De Zoysa saw to it that Sir Cyril’s shares were distributed among all his nephews resulting in Mr. V.T de Zoysa`s children receiving about four percent of the company each. However being a believer in the concept of ‘primogeniture’ (the eldest gets the lion share of assets) he saw to it that his eldest son Chulaka arranged by purchase of shares to have about 20 percent of the issued Capital of the AMW which was at that time Rs 25.5 million. There had been an arrangement to exchange shares with the Madanayakes who took over AMW shares in ACL Cables Ltd and in exchange gave up their AMW shares.

Chulaka de Zoysa, as the eldest of V.T. de Zoysa`s sons, took over responsibility of running AMW when the latter died In 1988 when I met Chulaka de Zoysa and joined the AMW Board, the Company was hardly profitable and not in the best shape financially. Coopers had come as consultants to restructure and advise the company. That was a condition of a consortium of Banks providing a loan to AMW. The marketing specialist who came from Coopers was Thilan Wijesinghe, a young MBA who had just returned from the US.

After his assignment from Coopers, this young MBA had joined the Sampath Bank, where the veteran business tycoon, N.U..Jayawardene was Chairman. NUJ heard about Chulaka’s business difficulties and was interested in buying the De Zoysa family shares and thereby getting management control of AMW. After examining the balance sheet he was to offer a premium on the market value which at the time came to about Rs 20 million. Chulaka’s de Zoysa`s personal advisors thought they could obtain a higher price. NUJ did not wish to offer more to seal the deal and withdrew.

A year later, the Company was turning around. Chulaka de Zoysa went to the U.S on a business trip. On his return journey he died in Germany. Ajita, his younger brother, who had never previously taken an interest in the Company, took take over as Chairman. He immediately appointed Tilak, the next sibling, as Managing Director in overall charge of the Company. Tilak’s specialty was marketing although his training originally had been in planting. He had been responsible for the motor division of AMW which was mainly the sale of Nissan cars and Yamaha motor cycles. A cousin. Earle Wickremesinghe, was made managing director of the factory division.

Ajita, like all nephews of Sir Cyril de Zoysa, had received about 4% of the shares of the company. He had, however, through the company he controlled, Associated Electricals Ltd, been buying into AMW. He was a resident of Australia. He visited Sri Lanka from time to time until his children completed their University education, after which he left Australia and came back to Sri Lanka with his family.

In time his younger son Ashan took an interest in the management of AMW. He was appointed director and Group General Manager in June 2005. He was being groomed by Tilak to take overall charge from him.

Looking back, the company had a turn around in fiscal year March 1991 the year of Chulaka de Zoysa`s demise. Since then profits were steady for four years during which time Ajita improved the financial position of the company by making two rights issues at a premium and reducing debt.

Tilak who was strong in public relations was able to convince CEAT, a successful tyre manufacturer in India, to come into a joint venture to manufacture automobile tyres. He had earlier arranged to take over the agency of the Indian car, Maruti , from Mercantile Trades Ltd, an N.U.Jayawardene company. It is an irony of fate that this agency which the NUJ group parted with for nothing should contribute substantially to make AMW’S market capitaliaation Rs. 10 billion when the outstanding business tycoon thought , a few years earlier, it was worth less than Rs. 30 million.

Tilak’s strength was his contacts in India and Japan, and their trust in him. The business generated thereby was instrumental in helping the company to make substantial profits. The surge in profits came really in 2005, when it increased six times the level of the previous year. Profits doubled again in 2006 to Rs 570 million after tax. The exponential growth in profits was largely attributable to sales of the new models of Maruti and Nissan.

Tilak`s relationship with the controlling owners of Maruti, the Japanese Suzuki Group, helped AMW to get the Suzuki agency too. That agency, in turn, helped boost the Company’s profits to record heights. The profitability of the company, helped the chairman to entice John Keells Holdings to take a 20% stake in AMW on a real estate development project. The company’s shares peaked and with the issue of bonus shares the market capitalization went upto Rs10 Billion.

In 2008, there was a dip in the profits of AMW. There were changes in the horizon that would have a direct bearing on the company`s business. The Chinese seemed interested in assembling automobiles in Sri Lanka. Furthermore, imports of the new Tata Nano at Indian Rs 100,000 could well erode sales of the Maruti 800. Ajita de Zoysa and his close associates felt that in order to remain competitive it was necessary for AMW to establish a car assembly plant. In addition there was the proposal to set up a large scale real estate development with John Keells and James Finlays between Union Place and Vauxhall Street.

Ajita de Zoysa realized that such projects meant raising several billions of additional capital. It was one challenge that seemed too far to contemplate. He was 65 years and considering retirement. He did not really wish to pass the burden of managing such massive undertakings on to his younger sibling or to his children.

In the midst of taking decisions regarding new directions for AMW, Al-Futtaim, a UAE Conglomerate, owned by billionaire Abdulla Al Futtaim, expressed an interest in taking a controlling interest in AMW at a price that was hard to refuse. Ajita de Zoysa saw that Al-Futtaim had sixty companies in various sectors including automotive, electronics, engineering and technologies, retail, real state, financial and general services. Apart from the obvious synergies with AMW, the Middle Eastern conglomerate was looking at other acquisitions which would help them to source products from Sri Lanka,to the UAE and to the large retail outlet they acquired in Singapore, Robinsons. They were also actively looking to recruit talented and dynamic individuals from Sri Lanka to staff their international operations.

For all the reasons cited above, Ajita de Zoysa, in consultation with Tilak and other family shareholders of AMW, decided to take up the offer to sell the controlling interest in AMW. The decision was not taken lightly. No doubt it resulted in great wealth to the major shareholders. But the two brothers felt that bringing in the Al Futtaim group to Sri Lanka would help the economy too. It would create new employment opportunities for Sri Lankans both here and abroad working for the conglomerate. Indeed the representatives of the conglomerate made it clear that they would train mechanics and others to be absorbed by them in their various enterprises.

No article on the AMW saga would be complete without mentioning the role of Ajita de Zoysa. He showed remarkable leadership qualities when called unexpectedly to head AMW. He proved to be an astute business man. He turned AMW around. He increased its market capitalization 500 times since the time he took charge.

Ajita de Zoysa has always had wider interests than making money for AMW. He has displayed in concrete terms his deep feeling for his country and its people. As a devout Buddhist, he agreed to direct the Kalutara Bodhi finances, in effect helping several temples, orphanages, homes for the aged and Dhamma schools. He is the Manager of Museaus College, a leading Buddhist girls school, a task he fulfills with ultra efficiency.

Similarly his brother, Tilak, too takes social responsibility of wealth seriously. He is Chairman of Helpage, Sri Lanka,, a branch of a charity helping the aged all over the World. He spends a great deal of his spare time helping many needy organizations and people. He is a member of the Monetary Board of Sri Lanka and a past Chairman of the Chamber of Commerce. He is currently Chairman of Carson Cumberbatch & Co Ltd one of the most profitable companies in Sri Lanka with vast overseas interests.