Hurry Harry!

Wednesday, 6 October 2010 23:36 -     - {{hitsCtrl.values.hits}}

Tycoon rushes to Commercial High Court over Monday’s CBD sale of 7.5% HNB stake for Rs. 5.7 b

Business tycoon Harry Jayawardena yesterday went to Commercial High Court over the sale of 7.5% HNB stake by CBD Exports Ltd on Monday for Rs. 5.7 billion.

Daily FT learns that Jayawardena had wanted an ex-parte order staying the transaction, but the other party had been present as well; hence the Court had postponed its decision. His resource to Court was following a brief letter sent to the Colombo Stock Exchange (CSE) with copy to the Securities and Exchange Commission (SEC) over the transaction.

It couldn’t be confirmed when the Court would make its order with some anticipating it to be today whilst speculation was that it was reserved for a later date.

None of the parties connected to the latest development could be reached for an official comment.

However some sources tracking the development claimed that Jayawardena’s position was that the stake of HNB held by CBD Exports was a “substantial asset” and hence divestiture requires shareholder approval at an Extraordinary General Meeting.

CBD Exports Board includes two persons who have an on-going dispute with Jayawardena though all were founders of Stassen Group originally. Within the CBD Board are Raj Obeysekera and Zaki Ali. Jayawardena isn’t a Board member of CBD which on Monday divested the long standing HNB stake enjoying hefty capital gains.

Company and market analysts said that almost prior to the sale HNB stake of CBD had been in the form of certificates, and shares were lodged in the Central Depository System (CDS) on Monday to execute the divestiture.

Though not a member of the Board, the move by Jayawardena to point to the requirement of an EGM suggests the tycoon is a shareholder.

Soon after the sale on Monday however analysts were quick to confirm that the divestiture by CBD was in keeping with directives by the Central Bank for the streamlining of the shareholding of HNB.

 Parties in support of the CBD Board had maintained that the sale was in order.

Independent analysts opined that if the transaction gets reversed it would be unprecedented in the history of the stock market.

Questions over Harry Jayawardena’s degree of effective control in HNB came to light after the original founders of Stassen and related companies fell out.  However since then as well the revestiture of Sri Lanka Insurance Corporation ownership from Jayawardena influenced companies to the Treasury and sale by CBD has gradually reduced the tycoon’s control in HNB. As per some analysts Jayawardena continues to control around 15% stake via three entities Milford Exports, Stassen Exports and Distilleries. Since late last year, state agencies have increased their shareholding and currently estimated to be owning around 20% stake in HNB thereby further diminishing influence of Jayawardena.

On Monday around 10.6% stake of HNB or 20.3 million shares changed hands for Rs. 8.1 billion (most at Rs. 400 per share). Apart from CBD, Browns sold around 3% stake. Buyers included another tycoon Sohli Captain, EPF, BOC, as well as a UK-based foreign fund along with several high networth individual investors.