AMF minority shareholders seek independent KPMG valuation, reject Rs. 55 offer

• Dissenting shareholders question valuation methodology, impairment provisions and potential conflict of interest following LB Finance acquisition

A group of minority shareholders of Associated Motor Finance PLC (AMF) has called on KPMG Sri Lanka to independently determine a “fair and reasonable” value for their shares, rejecting the Rs. 55 per share value offered following the company’s amalgamation with LB Finance PLC (LFIN).

In a letter dated 9 August to KPMG Sri Lanka and Maldives Country Managing Partner Suren Rajakarier, the shareholders said they were exercising their rights as dissenting shareholders under the Companies Act No. 07 of 2007 and had requested that the valuation question be referred to AMF’s auditors under Section 95(5)(a). They raised concerns over the valuation methodology, a sharp increase in impairment provisions following the acquisition, a one-off goodwill write-off of about Rs. 385 million and what they described as an inherent conflict of interest arising from LB Finance representation on the AMF Board.  

The letter said: “As you are aware, AMF was amalgamated with LB Finance PLC (LFIN), and the Board offered minority shareholders Rs. 55 per share. Although a significant number of minority shareholders voted against the Special Resolution at the Extraordinary General Meeting (EGM), the resolution was passed using the voting power of the majority shareholder, LB Finance PLC.

As dissenting shareholders, we are now exercising our rights under the Companies Act No. 07 of 2007. As the first step, we submitted a written request to the Board of Directors of AMF asking the Company to purchase our shares at a fair and reasonable value. The Board has since informed us in writing that it considers Rs. 55 per share to be the fair value.

Following this response, and in accordance with Section 95(5)(a) of the Companies Act, we requested the Board to refer the question of what constitutes a fair and reasonable value to the Company's auditors, KPMG. We understand that the Company may have already referred this matter to you.

We strongly believe that Rs. 55 per share is not a fair and reasonable price. This belief is supported by:

• The Independent Valuation Report prepared by HNB Investment Bank (Pvt) Ltd.
• The statements made by the Board of Directors of AMF during the acquisition of AMF by LB Finance PLC in November 2025 as per the requirement of Take-overs and Merges Code 1995 (As amended in 2003).

We also wish to draw your attention to certain matters that we believe should be carefully considered when carrying out your valuation.

After the acquisition of AMF, the Company's impairment provisions increased significantly. This had a substantial negative impact on the Company's financial results and, in our view, created an unfair situation for minority shareholders.

In addition, a goodwill write-off of approximately Rs. 385 million was recognised as a one-off expense in the Statement of Profit or Loss. This resulted in the Company reporting a loss in the final quarter of the 2025/26 financial year. We believe this was an exceptional, non-recurring adjustment and that similar significant write-offs are unlikely to occur during the 2026/27 financial year. We respectfully request that these factors be carefully considered when preparing any financial forecasts or valuation models.

We also wish to highlight that there is a clear conflict of interest in this process. Following the acquisition of AMF by LB Finance PLC, directors representing LB Finance PLC were appointed to the Board of Directors of AMF. As a result, the Board responsible for determining the consideration payable to AMF's minority shareholders includes directors representing the acquiring company. In these circumstances, there is an inherent conflict of interest, as the acquiring company has representation on the Board that is making decisions affecting the interests of the minority shareholders. This makes KPMG's independent opinion particularly important.

Furthermore, during the EGM, the Managing Director of LB Finance PLC stated that the amalgamation price was determined by applying 1.33 times the Net Asset Value (NAV) and that the same valuation approach had been used at the time of acquiring AMF in 2025. We respectfully request that the appropriateness of relying solely on this approach be independently assessed, considering all accepted valuation methodologies and the future earning potential of the Company.

KPMG is one of the most respected audit firms in the world and is widely recognised for its independence, integrity, and professional standards. Your opinion on the fair value of AMF shares is of great importance, not only because it is required under the Companies Act, but also because it will have a significant impact on the rights of minority shareholders.

We therefore respectfully request that you determine the fair and reasonable value of AMF shares using recognised and accepted valuation techniques, including methods that appropriately consider the Company's future earnings, cash flows, financial position, and long-term prospects, rather than relying on a single valuation metric.

As minority shareholders, we place our trust in your professionalism, independence, and objectivity. We sincerely hope that your valuation will reflect the true economic value of the Company and ensure that all shareholders are treated fairly and equitably. We believe that an independent, well-reasoned, and properly supported valuation will help resolve this matter fairly and may eliminate the need for minority shareholders to pursue any further action under the Companies Act. Thank you for your time and consideration. We appreciate your commitment to maintaining the highest professional standards and look forward to your independent assessment”.