Ishara buys out Japanese from LOLC, no name change likely



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Many landmarks were established by last week’s mega stock market deal through which Mr. Ishara Nanayakkara, Deputy Chairman of Lanka Orix Leasing Company PLC acquired the Japanese-owned shares of the Orix Corporation in the 34-year old company for a consideration of over Rs. 12.8 billion.


The acquisition was made by Nanayakkara through LOLC Holdings (Private) Ltd., a company of which he is the sole director and shareholder.


Stock Exchange filings indicated that the deal involved 142.45 million voting shares comprising 29.97% of the issued capital of LOLC. The acquisition increased Nanayakkara’s holding in LOLC to approx. 29.97%.


Mr. Kapila Jayawardena, MD/CEO of LOLC said yesterday that the exit of the Japanese partner, reputedly the world’s largest leasing company, will not entail a name change of the Lankan company which had about seven years ago branded itself as LOLC and seldom used the Orix name in its title.


"They were a passive investor rather like the foreign funds who have large stakes in JKH," he explained.


Among the landmarks resulting from the deal was that the CSE was able to break free of an eight-week market low, with its weekly turnover hitting a six-year high of Rs. 19.4 billion. The deal was the biggest since March 2012 when the Malaysian Fund Khazanah Nasional bought an 8.85% stake of JKH for Rs. 14.5 billion.


Analysts said that it was bigger than the transactions where Singapore’s Group Lease Holdings bought 29.99% of Commercial Credit and Finance PLC in Dec. 2016 for Rs. 10.9 billion and Hayleys’ Acquisition of Singer in Sept. last year for Rs. 10.5 billion.


The deal also reversed this year’s net foreign inflow into the Colombo bourse to an outflow of Rs. 2.5 billion.


LOLC describes itself as the largest non-banking financial institution in the country and one of its largest diversified conglomerates. It is into leisure, agriculture, plantations, overseas expansion, renewable energy, construction, manufacturing and trading in addition to other strategic investments.


It holds a substantial stake in Brown and Co. PLC.


The company which has been expanding overseas in the microfinance sector in recent years, is already present in Cambodia, Myanmar and Pakistan and is also looking at Indonesia and the Phillipines.


Former Aitken Spence Chairman Chari de Silva, long time chairman of LOLC, said the company was set up over 30 years ago when he was a director of the Bank of Ceylon. The International Finance Corporation (IFC) the World Bank’s soft loan window, had made the point that there was no leasing industry in this country.


"They thought it was a job for the private sector and proposed that De Silva pioneers the business," he said.


"I told them that I knew nothing about leasing and they said they will bring somebody from the world’s largest leasing company as managing director of the new company. That’s how Orix from Japan came in."


Although LOLC has been posting very high profits, it has declared no dividends in recent years. Shareholders have been told that the company’s share price which was down had been rising, a shareholder said.


The LOLC share was split some years ago with each existing share divided into seven at a time when many companies who felt their share prices were unaffordably high resorted to share splits.


Nanayakkara paid Rs. 90 per share on Mar. 28, below its net asset price per share of Rs. 97.55 (company) and Rs. 141 group. LOLC hit a high of Rs. 120 and closed at Rs. 118 on Wednesday, up seven rupees from the previous close.


Although the buyer had been in negotiations with the Japanese who have been exiting markets where they were minority shareholders for some time, the Colombo share market was taken by surprise by the mega deal.


Orix of Japan had two board seats in the Lankan company.


 
 
 
 
 
 
 
 
 
 
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