Minority shareholders shoot down BoC property subsidiary’s delisting move for want of fair price

Minority shareholders of Bank of Ceylon’s subsidiary Property Development Plc (PDL) last week achieved a major victory by shooting down the delisting move at the Extraordinary General Meeting for want of a fairer price. 

PDL is 95.5% owned by BOC and has the state giant as its tenant along with the head office premises. PDL has 3,386 shareholders owning 4.45%. 

The EGM was to get a shareholder nod for a delisting offer at Rs. 123 per share. However, minority shareholders alleged the price was not fair since PDL has not garnered the true value for its rental business from parent BOC. The resolution was defeated as PDL failed to garner 75% of the votes required. 

The bank has been paying Rs. 97 per square foot per month for the gross area of 598,421 square feet whereas the market rate is said to be Rs. 350 per share foot, the shareholders alleged.

As per good corporate governance, the company and related parties are expected to maintain an arm’s length relationship in the course of any business. At the EGM, some of the minority shareholders alleged that by not pricing the rentals at market rates, PDL has lost billions in revenue thereby comprising the company’s true potential. 

It was also opined that  though not against delisting minority shareholders must get a fresh independent opinion on the Rs. 123 exit-price. 

Some shareholders noted that with rapid development in and around the Fort area, the value of a PDL asset is likely to soar hence there is great upside in the company. The valuation of the building, including the plant and machinery integral to Building BOC Square No 1, had been valued by P.B. Kalugalagedara and Associates, at Rs. 6.77 billion as at 31 December 2017, lower compared to the Rs. 7.12 billion in the previous year.

It was alleged that BOC, being the major shareholder, was instrumental in the delisting move as it was unwilling to sell down to comply with the minimum public shareholding holding requirement of 10% imposed by the Securities and Exchange Commission. 

The net asset per share of PDL was Rs. 52.69 as of 31 December 2017, up from Rs. 46.44 a year earlier. 

The PDL Group in 2017 achieved revenue of Rs. 799 million, up from Rs. 695 million. Pre-tax profit was Rs. 657.6 million as against Rs. 615.7 million in 2016. Net profit attributable to equity holders was Rs. 484.2 million, up from Rs. 467.8 million.