John Keells Mega Deal Boosts Foreign Investor Confidence

Foreign investor confidence is back in Sri Lanka and the Rs. 22.7 billion mega-deal on the premier blue-chip John Keells Holdings (JKH) was flagged off as a big boost last week. Advisor to the broker to the deal, CT CLSA Securities Marianne Page reported that several foreign investors were keen to buy into JKH while Citigroup Global Markets Ltd., Agency Trading Prop Securities A/C had snapped up the 10.7 percent stake.

The seller was Khazanah Nasional Berhad, the sovereign fund of Malaysia.

"On JKH stake, we didn't do a global roadshow, but the market got wind of it, and there were some inquiries. There was interest locally too. All of those for were smaller parcels rather than the entire," the Singapore-based Page said while declining to be precise. Page said the price the transaction occurred at (141.8 million shares each at Rs. 160) was "fair" for mutually the seller and the buyer. The deal took place amid Middle East tensions, and the rest of the world felt its spillover effects.

"The fact that Citigroup Global Markets Ltd., Agency Trading Prop Securities A/C took over the big block completely reflects JKH and Sri Lanka's trust. The deal is a big boost in that sense," said Page, who has been promoting equity investments into Sri Lanka for several decades. She told the Colombo stock market was oversold, and valuations are moving ahead attractively. "I think interest from foreign investors is gathering momentum after General Elections. Post presidential election, signs were promising, ' added Page.

Market analysts were linking the account to the giant Fairfax, based in Toronto, Ontario. The HWIC Asia Fund, related to Fairfax, already had a 3% stake before the mega acquisition on Thursday, and its latest stake was close to 14%. The seller was Northern Trust Co S / A Broga Hill Investments Ltd., which affiliated with Khazanah. The deed deal lifted the confidence of investors and pushed CSE's turnover to Rs 23.6 billion, the highest since 2008. After suffering a 2 percent drop on Wednesday (the most severe in over two months), the ASPI shot up 85 points or 1.44 percent on Thursday, and the S&P SL 20 Index increased 64 or 2.3 percent. It was down 2.6 percent on Wednesday.

Fairfax Financial is a financial holding company involved in the management of property, casualty, insurance, and reinsurance, investment, and insurance claims.  Fairfax first entered Sri Lanka via the HWIC Asia Fund in 2013, acquiring a 15 percent stake in the JKH Trust Bank, a subsidiary of Nations. Fairfax bought 78 percent of the general insurance company of JKH-linked Union Assurance for Rs. 3 in 2015. 7 billion. A year later, Softlogic Holdings purchased 100% of the Asian Alliance General for Rs. 1. 2 Milliarde.

Market analysts said Fairfax had been negotiating the block for several months, while others said Khazanah had been searching for more than a year to get out of JKH. Fairfax's acquisition also allowed JKH to remain intact at 598.3 million shares or 45.4 percent. Captains and related parties own a 20% stake in JKH, followed by Melstacorp linked to Harry Jayawardena at 9.8%.

OSL Take: The news of the LKR 22.7 billion deal by John Keells is a clear indication of the development and growth of the Sri Lankan economy. Hence, this event should add to the confidence of foreign businesses/investors to explore business/investment opportunities in Sri Lanka.

 VBS/AT/17022020/Z_TB5