Ceylon Oxygen Limited, has decided to repurchase nearly 1.67 million ordinary shares of the company in the ratio of one share for every four shares held as at October 20 at a price of Rs.266 per share following review of the capital structure of the company.

This share repurchase would involve a maximum cash outlay of Rs.448.9 million of which Rs.59.9 million would be met from excess cash held by the company and Rs.389 million by borrowings, the company has told shareholders.

The majority shareholder of Ceylon Oxygen, Specialist Gases Pvt Limited, has agreed that the purchase consideration due to minority shareholders should be first met and they would be paid only thereafter and any delay in finalizing the borrowing component will not affect payment to minority shareholders within 21 days of the closure of the offer.

In a circular to shareholders, the directors of Ceylon Oxygen have expressed the view that it would be in the best interest of the company "to acquire some debt and reduce equity" enabling increased shareholder value and providing a more optimal capital structure for the company’s operations.

"The share repurchase would also release to the shareholders the cash which is currently held by the company which is in excess of its wants," the directors said.

As required by the Company’s Act, the directors have resolved that the share purchase is in the best interest of the company and obtained confirmation from its auditors that the consideration to be paid for the share was, in the opinion of the auditors, fair value.

The directors have also resolved that they are not aware of any information not disclosed to shareholders material to the assessment of the value of the shares which would make the consideration offered unfair to shareholders accepting the offer.

The board had further resolved that it is satisfied that the company will immediately after the repurchase satisfy the solvency test and they have obtained a certificate of solvency from the auditors in this regard.

The repurchase offer enables shareholders to sell more shares than they are entitled to by the one for four ratio, with the board, at its absolute discretion, able to repurchase such excess offered subject to the limitation of the repurchase to a maximum of approximately 1.7 million shares.

The offer to repurchase is due to close on November 6.

During the eight months ended August 31, 2008, Ceylon Oxygen posted revenue of Rs.656.4 million and a profit after-tax of Rs.82.9 million.