Lanka Orix Leasing Company Plc (LOLC) yesterday announced moves to get control of diversified blue chip Brown and Company Plc for Rs. 1.32 billion.
LOLC’s fully-owned subsidiary LOLC Investments Ltd. has signed a share sale and purchase agreement to acquire the balance 50% stake in Diriya Investments Ltd., the ultimate holding company of Browns, with a 49.8% stake. Already LOLC directly holds a 4.7% stake in Browns.
The stake in Diriya Investments is held by Browns Director Ajith Devasurendra. By virtue of 50% stake previously in Diriya and the direct stake, Brown to date has been a subsidiary of LOLC.
The terms and conditions of the transaction requires LOLC Investments Ltd. to make an initial payment of Rs. 660 million to the seller with a further period of one year to settle the rest of the consideration.
“This strategic acquisition will create a strong platform for the LOLC Group to maximise the potential for growth with the strong synergies available in the two groups of companies and function as an even stronger conglomerate,” LOLC said.
The senior partners of the leading law firm Nithya Partners will function as the Escrow Agents to the transaction.
Diriya Investments’ number of shares in issue is 216 million and for the 50% balance stake (around 108 million shares) LOLC Investments had paid Rs. 12 per share. Diriya Investments is likely to be the owner of a collective 49.8% stake in Browns held via Engineering Services Ltd., (23.41%), Mason’s Mixture, Mutugala Estates Ltd. and Pathregalla Estates.
The announcement by LOLC was made late evening after the market had closed. Browns stock was trading between Rs. 108 and Rs. 105.50 before closing at the former level, up by Rs. 3. LOLC was down 80 cents to close at Rs. 36.20. EPF holds a near 5% stake in Brown whilst SLIC and NSB also hold 1.5% each.
Browns’ net asset value is Rs. 113 (company) and Rs. 205 (Group) as at end FY2012, down from Rs. 135 and Rs. 214 respectively in the previous year.
Group assets amounted to Rs. 33 billion and that of the Company was Rs. 15.3 billion
In FY12, net profit attributable to equity holders of Browns was Rs. 1.168 billion, down by 47% over the previous year. Group post-tax profit was down by 7% to Rs. 3.05 billion whilst gross profit improved by 6% to Rs. 3.4 billion and turnover by 20% to Rs. 14.5 billion.
LOLC in FY12, its bottom line improve by 66% to Rs. 6.37 billion whilst Group after tax profit rose by 27% to Rs. 8.9 billion. Profit from operating activities however dipped by 9% to Rs. 7.14 billion whilst Group revenue rose by 16% to Rs. 37.8 billion.
The trading giant Brown & Company PLC, which has been in operation for 135 years, is a diversified conglomerate with operations in several key industry sectors including Investments, Plantation & Agriculture, Power Generation, Marine & Manufacturing, Home & Office solutions, Environment & Pharma as well as Travel & Leisure.
The Browns Group holds several leading local and global brands, including Exide Batteries, Tafe, Sifang, Massey Ferguson, Austrian Airlines, BG, Continental Airlines, Eclipse, Intervet, Oce, Olympus, Sharp, Eukanuba, Zagro, Yanmar Marine Engines, Ashok Leyland Marine, Pitney Bowes, Scandinavian Airlines, Makita, Maktec, F. G. Wilson, Yamasha, Daelim Royal Boiler Co and MFG.