- New buyer of controlling stake Serenity Lake Leisure-linked TAD Holdings to pay Rs. 187 per share, thrice the NAV
- Speculation of impending sale doubled Hunas share price to a high of Rs. 165 within two weeks
- Hayleys Group to exit for Rs. 696 m; if remaining shareholders accept mandatory offer new buyer to incur Rs. 356 m more; Hunas has over 2,200 shareholders
Hayleys Group, other shareholders and retailers are in for a windfall with the impending purchase of control of Hunas Falls Hotels PLC at a premium by Serenity Lake Leisure Ltd.
Hayleys Group on Friday announced that Carbotels Ltd., (owning 50.22%) and Amaya Leisure PLC (16%) have entered into a Share Sale Purchase Agreement with Serenity Lake Leisure Ltd for the sale of their entire shareholdings amounting to 66.2% for Rs. 696.3 million. The stake amounting to 3.724 million shares will be bought at Rs. 187 each.
The deal price is at a premium as the net asset per share of Hunas is Rs. 60.39 (as at 30 September 2018) down from Rs. 63.67 a year ago.
However the impending deal fuelled speculation in the market past two weeks propelling Hunas share price to all time high levels.
Last week Hunas Falls closed at a record high of Rs. 160.10, up by Rs. 28.30 or 21.4% and touched an intra-week highest of Rs. 165. In the previous week it gained by Rs. 51.30 or 64% to close at Rs. 131.80 (highest of Rs. 137.40). Around 116,200 shares change hands last week via 803 trades for Rs. 18 million whilst in the previous week, 85,185 shares via 516 trades were reported for Rs. 10 million. In the FY19 second quarter, only 12,656 shares transacted via 93 trades for Rs. 1 million. Hunas’ previous 54-week highest was Rs. 104.
The deal price of Rs. 187 for control means Serenity Lake Leisure will have to make a mandatory offer to remaining shareholders. For those bought shares last two weeks even at high prices there is a gain whilst it will be big windfall for longstanding shareholders.
The public float of Hunas is 31% held by 2,193 shareholders. Jetwing Group holds 15% stake.
Serenity Lake is going ahead with the purchase with a commitment to buy remaining shareholders and if the latter accepts the mandatory offer the new controlling shareholder will incur an additional Rs. 356 million bringing the potential deal value to Rs. 1.05 billion. Industry analysts said Hunas Falls will require additional investment for a proper revamp if the popular hotel for weddings and honeymoons was to perform to its full potential. The hotel was awarded as the Most Romantic Hotel in Sri Lanka at the South Asian Travel Awards 2017. It has 28 Deluxe Rooms, one Cardamom Suite and two Theme Suites.
In Hayleys Group disclosures, Serenity Lake's promoters weren't disclosed but speculation is that it is linked to TAD Holdings Ltd., which operates as the local partner of a number of ventures incorporated with Japanese FDIs and handles the administration, management and operations of those businesses that function as sub brands of one holding company.
TAD's brainchild are Toshiaki Tanaka, Atheeq Ansar and Dhanuka Samarasinghe. In partnership with their Japanese counterparts, they have forayed in to a number of key industries in the country in highly profitable areas such as renewable energy, property and plantations. Apart from Japan, TAD has also expanded to Maldives, Myanmar, Uganda and Kenya.
In FY18, Hunas Falls turnover dipped by 13% to Rs. 126 million and suffered a post-tax loss of Rs. 13 million as against a profit of Rs. 3.2 million in FY17. Hotel’s ARR reducing from $ 133 in FY 2016/17 to $ 114 in 2017/18. Occupancy also fell from 46% to 42%.
In first half of the current FY19, revenue amounted to Rs. 68.7 million, up from Rs. 65.8 million a year ago whilst gross profit was unchanged at Rs. 50.7 million. Net loss however was reduced to Rs. 1.1 million from Rs. 3.4 million in first half of FY18. In recent years first half net profit had averaged between a low of Rs. 4.8 million (FY16) and a high of Rs. 8 million (FY15).