LOLC signs deal acquisition to sell Cambodian unit to Korea’s Kookmin

LOLC Holdings of Sri Lanka said it had signed two agreements to sell its Cambodian subsidiary PRASAC to Kookmin Bank of Korea for 603 million US dollars. Kookmin Bank, South Korea's largest commercial bank, has signed a share purchase agreement and shareholders agreement with LOLC Holdings, subject to final approval by the National Bank of Cambodia and the Republic of South Korea's Financial Services Commission, the Sri Lankan firm said in disclosure of the stock markets.

PRASAC is Cambodia's largest microfinance institution, with a 70 per cent stake in LOLC's Singaporean subsidiary LOLC International Private Limited.

LOLC will sell PRASAC's 70 per cent ownership in two tranches; an immediate 422 million rupees and 2022 balance. The Group also controls LOLC Cambodia Plc, the South East Asian nation's fourth-largest microfinance company.

In 2007 PRASAC was the first foreign investment by LOLC. The group also has microfinance companies operating in Myanmar, the Philippines, Indonesia, Pakistan, Zambia, and Nigeria. Before the deal announced in early December, LOLC's share price had risen 179 rupees by December 30, from 113 rupees one piece. During the last week, the share price has fallen to 169 rupees.  

OSL Take: The acquisition by one Sri Lankan company of a business unit of another local company indicates the strength of local businesses. It is also an indication of the overall growth of the country’s economy. Therefore, foreign companies could look at forming joint ventures with local companies to expand their business ventures in the South Asian region. The latest acquisition of a local entity is yet another indication of the strength and growth of the country’s private sector.

The business conducive environment and the ease of doing business environment in the country have helped the growth of Sri Lankan companies. Sri Lanka’s geographical positioning in the Indian Ocean, the ease of doing business environment in the country and the many trade agreements, as well as trade concessions enjoyed by the state, have made it an attractive business destination in the South Asian region.

China remained a top foreign acquirer of Sri Lankan assets in 2018, as measured by transaction value, with over $1 billion investments to date. Hence, Sri Lankan companies remain popular hotspots, targets for multi-billion-dollar Chinese businesses/investors who could explore business/investment opportunities in Sri Lanka with an increase in the M&A deals in later 2019. Therefore foreign businesses/investors could explore opportunities of investing in local businesses or look at forming partnerships/joint ventures with Sri Lankan companies to use the trade facilities enjoyed by the island to expand activities in the Indian Ocean region further.

VBS/AT/27022020/Z_TB4