Ceylinco Finance PLC proposes to amalgamate with Asian Finance Limited and shareholder approval for this will be sought at an EGM on December 30 immediately following the 21st AGM of Ceylinco Finance, shareholders have been told.

The amalgamation decision had been taken in September this year by the boards of directors of the two companies with the new entity to be called Ceylinco Finance PLC, the directors said.

They were of the view that such an amalgamation is in the best interest of the company and the amalgamated company will satisfy the solvency test immediately after it becomes effective.

The amalgamation is to be done through a share swap exercise with the minority shareholders of Asian Finance receiving seven ordinary shares of Ceylinco Finance for every two shares held in Asian Finance.

Ceylinco Finance will issue a maximum of nearly 1.1 million ordinary shares to acquire approximately 0.3 million Asian Finance shares held by the minority shareholders of that company.

Ceylinco Finance has told its shareholders that following the amalgamation it will receive the status of a licensed finance company by the Central Bank which will add value to the entity and enhance its recognition in the financial services sector.

This license will enable Ceylinco Finance to mobilize deposits with a special emphasis on savings enabling the company to reduce its interest costs on borrowings. Economies of scale will also be possible following the amalgamation.

Ernst and Young valuing the minority shares of Asian Finance have noted that Asian Finance has an issued share capital of 2.9 million ordinary shares of which 89.4% is owned by Ceylinco Finance. Four of the five largest shareholders as at March 31, 2008 are also companies of the Ceylinco-Seylan group.

In its last annual report, Ceylinco Finance posted a profit of Rs.15.5 million in the year ended March 31, 2008, down 90.1% from the previous year’s profit of Rs.156.4 million.

The company’s chairman, Mr. Lalith Kotelawala, attributed the downturn in profit to the "rise in cost of capital, fierce competition, subdued business climate and a lackluster real estate and property market.’’

"Notwithstanding the above, a significant rise in the asset base of the group over the previous year and also the group as well as the company maintaining profitability during these difficult times is a noteworthy fact," he said.

"The group worked on consolidating its position and strengthening its brand image, after its name change, which was done to facilitate its journey towards obtaining the license as a finance company in order to better portray its image."