Ceylon and Foreign Trades Plc (CFT) on Friday announced plans to acquire a related party venture, Spice of Life (Pvt) Ltd., via a share swap.
The move follows a CFT Board meeting where its Directors resolved to recommend to shareholders an issue of shares by way of a share swap in the proportion of 91.315 new ordinary shares in CFT for every one share held in Spice of Life Ltd.
Subject to regulatory and shareholder approval, the move will entail issuing 155,235,500 shares. The current stated capital of the entity is Rs. 14 million.
Established in 1949, CFT is trading and investment company listed on the CSE whilst Spice of Life, though related, is an unlisted entity.
CFT described Spice of Life as probably the largest spice exporter from Sri Lanka, mainly exporting cloves, black pepper, nutmeg, mace and cinnamon to international markets. Spice of Life receives its supply of spices through the supplier network of dealers and collectors in the spice growing areas in the hill country and the south. These spices are checked, dried, cleaned, sorted, graded, packed and made ready for export up to international standard ISO 22000:2005.
“There is an immense demand in international markets for the produce shipped and Spice of Life branded products command a premium in the markets,” a CFT spokesman said.
For the year ended March 2011, Spice of Life’s export sales totalled Rs. 2.8 billion and the sales achieved for the quarter ended June 2011 is Rs.726 million. Spice of Life earned a net profit of Rs. 125 million for the year ended March 2011 and the combined companies’ a net profit of Rs.155 million, while the combined sales totalled Rs.3 billion
Spice of Life has a substantial share portfolio valued at Rs.355 million and the combined companies’ share portfolio is worth Rs.700 million.
“The synergies created by this acquisition and the future potential of growth and earnings of the combined companies can be very substantial,” the CFT spokesman added.
As per provisional results in the 2010/11 financial year CFT posted a posted a Rs. 29.5 million net profit, up from Rs. 1.6 million a year earlier. Group revenue amounted to Rs. 155.3 million, as against Rs. 105 million in 2009/10 financial year.
Major shareholders of CFT are I. Shabbir (31.5%), S.H.A. Gulamhusein (controlling 25%) and Spice of Life (20%). The two companies share several common directors as well.