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Hayleys to buy Singer Sri Lanka control for Rs. 11 b in biggest ever acquisition

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Export-rich diversified blue chip Hayleys Plc yesterday announced the country’s biggest ever acquisition - control of consumer durables giant Singer Sri Lanka Plc for Rs. 11 billion. 

In a filing with the Colombo Stock Exchange (CSE), Hayleys said yesterday it entered into an agreement to buy 61.73% stake or 231.86 million shares of Singer Sri Lanka at Rs. 47 per share in a deal worth Rs. 10.89 billion from the latter’s parent Retail Holdings (Sri Lanka) BV.

Hayleys also entered into a further agreement to purchase either by itself or through nominees a further 9.47% being the balance shareholding of Retail Holdings Sri Lanka BV at Rs. 47 per share by itself or through its nominees within 12-15 months from the original transaction for 61.73% stake.  “Hayleys Group has been exploring opportunities in the consumer and retail sector and had been having negotiations with Retail Holdings,” Hayleys said in its disclosure. 

The deal strike price was at a slight premium to trading value of Singer shares which was Rs. 44.40 on Friday. However, certain brokers and investors got wind of the confidential deal in the making, prompting the Singer share price on Monday to gain by Rs. 8.10 to close at Rs. 52.50 after touching a high of Rs. 53.50. Only just above half a million Singer shares traded on Monday for a Rs. 28.8 million turnover. 

The sharp rise of relatively illiquid Singer shares was due to those speculators aiming to cash in the mandatory offer following the acquisition of controlling stake. 

Trading on both Singer and Hayleys was suspended by the CSE yesterday pending clarification of speculation. 

Punters did not bet on a possible upside on Hayleys share as it closed on Monday lower by Rs. 2.40 to Rs. 274.60 after touching an intra-day high of Rs. 276. 

Singer’s 52-week highest price is Rs. 149.90 and the lowest was Rs. 43. At the Company level Singer’s net asset value per share is Rs. 14.07 whilst at the Group level it was Rs. 20.22 as of June 2017, down from Rs. 15.80 and Rs. 21.71 as of December 2016.

Hayleys will make a mandatory offer to buy the remaining shareholding after the transaction goes through, which is expected to be on Friday as speculated by the market. 

The public shareholding of Singer Sri Lanka is 28.80% held by 2,468 shareholders. Major shareholders include several foreign funds. The biggest local shareholder is Ceybank Unity Trust with 3.25% stake.

The Singer Group (which includes Regnis Lanka Plc and Singer Industries Plc) revenue in the first half of 2017 increased by 13.6% to Rs. 25.1 billion, compared to the same period last year. The growth is despite tough business conditions. However, lower margins and higher interest both impacted group profitability in the first half. Group net profit for the first half was Rs. 666.5 million, a reduction of 27% compared to the prior year (excluding the one-time gain in first half, 2016).  

Group net profit for first half was Rs. 666.5 million, a reduction of 27% compared to the previous year (excluding the one-time gain in first half, 2016). In the case of the company, net profit for the first half was Rs. 525.5 million, a decrease of 26%.

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