Dialog to ring more digital financial services with Rs. 1 b buy of 80% stake in finance company

Dialog Axiata Plc, Sri Lanka’s premier connectivity provider, yesterday stepped up its foray into digital financial services with the acquisition of 80.34% stake in Colombo Trust Finance Plc (CTF) for Rs. 1.072 billion.

The deal was done at Rs. 28.70 per share via a crossing on the CSE and the acquisition was from the Cargills Group. The strike price was at a premium as CFT share and closed yesterday at Rs. 18.70. Net asset per share as at 30 June 2017 was Rs. 9.66. CTF was previously known as Capital Alliance Finance Plc. Cargills originally bought the finance company at Rs. 15.50 per share in August 2014.

CTF is a finance company licensed by the Central Bank of Sri Lanka operating under the Finance Business Act No. 42 of 2011. It had assets worth Rs. 1.3 billion and liabilities of Rs. 856 million. 

The transaction has been approved by the Monetary Board of the Central Bank. In accordance with the Takeovers and Mergers Code of the Securities and Exchange Commission, Dialog will proceed to announce a mandatory offer to the remaining shareholders of CTF.

 The other major shareholders are Lankem Ceylon (7.26%), Divasa Equity (3.8%) and HV Lanka Exporters (2%). The public shareholding percentage was 12.40% and the number of shareholders representing the public holding was 699 as at 30 June 2017.

Dialog said the acquisition will facilitate the expansion of the scope of operations of the group into the sphere of mainstream digital financial services. 

Dialog aims to bring together the realms of advanced digital connectivity and cutting-edge Financial Technology (FinTech) to deliver a revolutionary suite of products and services which will expand the vistas of financial inclusion in Sri Lanka. 

Significant within the envisaged inclusion drive will be a focus on financing solutions aimed at increasing the affordability and accelerating the adoption of digital devices and services by a wide spectrum of consumers and businesses.

Dialog Axiata entered the sphere of financial services in 2012 when it was licensed by the Central Bank of Sri Lanka to operate the country’s first Mobile Payment Service eZ Cash. Now in its fifth year of operation, eZ Cash has over the years secured over 2.8 million Mobile Payment subscribers from across the Etisalat Hutch and Dialog Mobile Networks. 

In 2015, eZ Cash won the GSM World Award for the Best Mobile Payment Network Globally in recognition of it being the world’s first end-to-end inter-operable mobile payments network. More recently, Brand Finance named eZ Cash Sri Lanka’s highest valued e-commerce brand. Dialog also operates the TOUCH contactless transport payment service under license by the Central Bank of Sri Lanka.

Dialog’s latest acquisition CTF will be operated alongside the Digital Services portfolio of the Dialog Group. Other digital ventures of the Dialog Group include Sri Lanka’s leading e-commerce portal WoW.lk operated by Digital Commerce Lanka, Doc.lk operated by Digital Health Ltd. and the country’s leading digital education service Guru.lk operated by Headstart Ltd.

Dialog Axiata Plc Director and CEO Supun Weerasinghe said: “Dialog envisages that its foray into financial services will help accelerate Sri Lanka’s drive towards adoption of Digital Financial Services by encouraging digital savings and increase access to financial services for all segments of society. Dialog will also leverage this acquisition to drive down the entry barriers for adoption of smart technology and devices through inclusive financing solutions.”

NDB Investment Bank acted as financial advisors to the acquisition, whilst FJ&G de Saram acted as legal advisors to the transaction.