Central Bank Governor Ajith Nivard Cabraal yesterday said that the Bank of Ceylon taking a 10% stake of the Seylan Bank was more a ``gentle request’’ than a directive, as stated by BOC in a Stock Exchange filing.
``I’d prefer to call it a `gentle request’ rather than a directive,’’ he said. ``A similar request was made to the Sri Lanka Insurance Corporation. The state sector, with the National Savings Bank and the EPF, will now have 30% of Seylan which is a stabilizing factor.’’
Lanka Orient Leasing Company PLC which has taken a 10% stake and Brown and Co. PLC which too took the same stake had invested in Seylan for different reasons, senior company officials said.
Browns see synergies with Seylan which has an extensive branch network for its agricultural services to the rural countryside while LOLC which made a bid to take control of the bank and was the only remaining bidder in the second round is looking at the stake as an investment.
``We’re also expanding into the North and East and many other areas and a partnership with Seylan which has an extensive branch presence will be helpful,’’ a Brown’s senior explained.
While these stakes were taken at Rs. 35 a share, the price offered in the LOLC bid for control, Cabraal pointed out that LOLC wanted to take a large slice of non-voting shares of Seylan, convertible at a point of time to voting shares, at a much lower price.
``They wanted to take more convertible non-voting than ordinary voting shares and that would have made their price much cheaper on conversion,’’ he explained.
Asked whether the relationship between LOLC and Browns which collectively own 20% of Seylan will need Central Bank approval, Cabraal said the Monetary Board will look at it if necessary.
Mrs. Rohini Nanayakkara is Chairperson of both companies with Mr. Ishara Nanayakkara, Deputy Chairman of LOLC also a director of Brown’s. He, together with related parties has substantial shareholdings in both companies.
Cabraal was confident that Seylan which is now stable will be a good investment in the medium to long term.
While LOLC is resource rich, Brown’s has internally raised the funds needed for its Seylan stake. Analysts noted that Brown’s own 15% of HNB which it may sell if the price is right.
It was wrongly speculated that Brown’s had sold 1.5% of HNB which changed hands on the CSE last week. ``We were not the seller,’’ a Brown’s source confirmed.
The new owners of Brown’s have no board representation on HNB with nominees under the previous controlling interest continuing on the bank’s board. However, the LOLC/ Brown’s interest expect to gain board representation on Seylan.