look Takeovers and Mergers Code shortly
Securities and Exchange Commission (SEC) is in the process of revising
the Takeovers and Mergers Code. It is being revised in order to reduce
the risk of rules being manipulated and to be able to address the
issues faced by the SEC successfully.
code first introduced in 1995 was found to be outdated and
inadequately equipped to address the new situations.
SEC has appointed a committee to consider amendments to the code,
which is headed by Additional Solicitor General, Saleem Mahsoof.
to The Sunday Leader, Mahsoof said the existing code was formulated
using the British code for takeovers and mergers as its base and was
of the opinion that this was not appropriate for Sri Lanka.
Sri Lanka the code is statutory and comes under the Securities and
Exchange Commission Act, where non-compliance leads to charges being
filed against the violating party, whereas in Britain it is entirely a
voluntary practice where the listed companies engage in a procedure of
self-regulation - a reason why the existing code in Sri Lanka was
committee is currently carrying out extensive studies on the subject
and is also studying the laws related to takeovers and mergers in
Malaysia, Singapore, Hong Kong and India for a more comprehensive
viewpoint prior to making final recommendations and would be
formulating proposals which will be presented to the SEC for approval.
SEC hopes to address a number of issues on takeovers and mergers. One
such issue is in the event a certain party acquires 30% of the voting
rights of a company, this triggers the mandatory offer made statutory
by the code. The mandatory offer is what the acquiring party must
offer to purchase from the other shareholders their shares at the same
premium it was bought for.
rule is expected to be implemented in a stricter sense so that the
interests of the minority shareholders will be protected.
issue faced by the SEC is the indirect acquiring of voting rights in a
company through indirect buying in non-listed companies. Since the
code only regulates the companies listed on the Colombo Stock Exchange
(CSE), the code does not have provisions to deal with such situations.
committee will also make recommendations that will promote greater
transparency in disclosures of corporate entities and hopes to
introduce rules to prevent the undue siphoning of funds.
pointed out that in some cases where genuine takeovers have been made,
the other companies tend to take defensive action. The SEC will also
recommend independent advice to both the acquiring and acquired
parties, prior to takeovers and mergers.
all this, the SEC's primary objective is to safeguard the rights of
the shareholder," said Mahsoof.
SEC emphasised that although it had called for public reviews on
several occasions, there was hardly any response. "We wrote to
all the listed companies but the feedback was very unsatisfactory. We
wanted to have the views of the major players in the market prior to
finalising the draft. But now, since we cannot postpone the process
further we have decided to call for public opinion once the draft is
done," said Director General, SEC, Palitha Gunawardena.
Sunday Leader spoke to several companies listed on the CSE however
many were unaware of the exact recommendations made by the SEC. Joint Managing Director, John Keells Holdings Limited, Ajith
Gunawardena said that any loopholes in the legislation should be seen
said it is important that minority shareholders have the right to exit
from their investments, adding, "This right must not be taken
away by other means and must be protected."
volatile due to political deadlock
at the Colombo Stock Exchange (CSE) on Monday, January 26 looked
positive from the early hours. At day's end the ASPI closed at
1,180.95 points and the MPI closed at 2,170.35 points - a rise in both
indices compared to the previous trading day and the day's turnover
was a high Rs. 467.3 million. Among the top gainers were AMW with the
share value rising from Rs. 67 to Rs. 90 and among the day's top
losers was Richard Peries, where the share value fell sharply from Rs.
160.26 to Rs. 95. Foreign purchases amounted to Rs. 11.6 million and
domestic purchases amounted to Rs. 465.6 million. Market
capitalisation was Rs. 292.4 million.
on Tuesday took off from where it left on Monday with the ASPI closing
at 1,234.31 points and the MPI closing at 2,228.04 points. Among the
top losers was AMW where the share value fell from Rs. 90 to Rs. 70.
The day's turnover was Rs. 478.7 mn. Domestic purchases amounted to Rs.
445.2 mn while foreign purchases accounted for a measly Rs. 33.04mn.
Day's end market capitalisation amounted to Rs. 305.06 mn.
trading was a roller coaster, with the ASPI finally closing at
1,225.07 points and the MPI at 2,196.76 points. The day's turnover was
Rs. 240, 606,158. Foreign purchases amounted to Rs. 44.9 mn and
domestic purchases amounted to Rs. 195.5 million. Day's end market
capitalisation was Rs. 303.3 million.
Thursday the market was in reverse gear with both the indices falling
- the ASPI closed at 1,197.34 points and the MPI closed at 2,138.02
points. The share value of DFCC fell from Rs. 350 to Rs. 327.25.
Foreign purchases amounted to Rs. 8.1 million and domestic purchases
amounted to Rs. 90.3 million - a considerable drop compared to the
previous days of the week. However the market on Friday picked up
steadily with both the ASPI and MPI indices recording gains. The ASPI
closed at 1,211.11 points and the MPI closed at 2,169.65 points and
turnover for the day was Rs. 112.3 million.
to The Sunday Leader, Research Manager, HNB Stock Brokers, Hasita
Premaratne said the market was volatile but overall the market was
positive. He said the market went up on Tuesday due to expectations
over the Mano-Malik talks. He said the market corrected on Thursday
because of the over-reaction during the week. He further noted that
next week the market will continue to be volatile
and will depend on the political scenario.
US dollar exchange rate registered a slight dip throughout last week
compared to the week before. On Monday it was selling at Rs. 98.67 and
by Friday had dropped to Rs. 97.77, with the exchange rate showing
signs of stabilising. Financial analysts were of the opinion that the
market forces corrected itself and due to this the rupee appreciated
slightly. Given the rate at which the rupee was depreciating against
the dollar over the past few weeks, it was expected to rise to around
Rs. 100 to the dollar. Some analysts said the Central Bank - although
denying to have done so - may have actually intervened and taken steps
to stabilise the dollar.
often sharp movements in the rupee, interest rates and the stock
market in the short-term are a reflection of the political crisis in
the country. "In the short-term, movement on a daily or weekly
basis of the dollar has been very reflective of the political
situation," said Chief Executive Officer, Frontier Research, Amal
Sanderatne. Another reason for the minor stabilisation of the dollar
seemed to be the sentiment that prevailed due to the political
consensus following the alliance between the People's Alliance and the
JVP. "Within the last week there has been increased optimism that
a solution will be found to the cohabitation issue. This optimism is
reflected in the fact that the rupee has appreciated," Sanderatne
agrees to meet J-Biz alone
Business Forum (J-Biz) Chairman, Mahinda Amarasuriya announced last
week Prime Minister Ranil Wickremesinghe has indicated he would meet
J-Biz, but alone.
J-Biz had suggested both the President and the Premier should attend a
meeting together to discuss the country's deteriorating political and
economic climate, the PM has responded stating there was no point in
holding a conference together and J-Biz has set up a meeting on
February 6 with the PM.
at a press conference on Wednesday (28), Amarasuriya said that if the
President and PM cannot reconcile soon, the country will face a severe
economic crisis by April.
J-Biz has still not decided on action plan that will be implemented if
the President and PM fail to resolve their differences.
forum has decided to hold a round table conference with all the
important organisations in civil society in order to finalise the
proposals that have been put forward and get the signatures of key
members of civil society and religious dignitaries. It has also
decided to hold a meeting on February 20 with the regional chambers of
commerce and representatives from all parts of the island.
hope to have a wider group at discussions. It is quite clear that due
to this crisis, it is the Small and Medium Enterprises (SMEs) that are
affected the most. We hope to get more people from outstations that
represent these enterprises and get a wider cross section of
opinion," said Amarasuriya.
about the JVP-SLFP alliance, Amarasuriya stated that J-Biz had no
problem with any party that had open economic policies but
unfortunately, the JVP has not advocated an open economy. "All
parties come out with nice policies, but we cannot only depend on what
they say. We can only judge them by their past track records, and it
is quite clear that the JVP has a bad past of killings. Therefore we
are worried about this signing of the MoU between the SLFP and JVP,"
alliance - can it survive?
Sri Lanka over the last 20 years, the staggering economy and the
effect of war was only supposed to be felt by the business community
and the average citizen of this country.
politicians regardless of the situation drove around in the most
expensive cars and dined at five star hotels expecting the people who
create jobs for the unemployed to pay taxes to keep the government
alive, invest in the economy to keep the engine of growth running and
to make all the sacrifices.
the last 18 months people saw some hope with the ceasefire about to
give the average citizen a new lease of life. This was not to be
because President Chandrika Kumaratunga decided to suspend parliament
and hijack some key ministries. The fact that Kumaratunga's action has
pushed the country into chaos and turmoil does not seem to worry her
languishing in the doldrums from 1999 and a recession in 2001, the
economy had just begun to recover. Tourist arrivals surpassed all
previous records and the coming season had the hotels overbooked.
Above all there was peace. Her decision to sack three ministers and
prorogue parliament resulted in the stock market losing Rs. 80 billion
of its value, the rupee depreciating by 4% and US$ 200 million worth
of foreign investments being put on hold.
majority of the people of Sri Lanka do not care who enables the
economy, as long as it is effectively enabled. It is high time the
people of this country hold political leaders accountable and
responsible for their actions without watching in silence.
this context the current J-Biz effort to exert pressure on the
President and Prime Minister to resolve the deplorable political
crisis is praiseworthy. The UNF and Kumaratunga will have to put their
house in order without delay. We know that Wickremesinghe is a man of
principles and has pledged many times to deliver prosperity to all
citizens. It up to him to stand up and deal with the stand-off without
allowing the country to drift. Therefore, the challenge to the two
leaders is to work together as a team, do what is good and do it well.
to Kumaratunga, she took charge of defence, interior and media for
security reasons. Well we all know what happened during her tenure as
defence minister. Since she took over as defence minister, she did
nothing to dismantle the Manirasakulam camp nor re-negotiate the MoU
with the LTTE.
certain fallout of this crisis is that work will get disrupted as
investors and state officials adopt a wait and see attitude and as a
result development will suffer. What the President should have done is
to have invited the UNF government to work with her and take
collective responsibility rather than striking when the Prime Minister
was visiting the United States, to discuss our aid programme.
PM however returned to a grand welcome from thousands of supporters.
Many of them joined the crowed spontaneously because their dreams were
shattered because of the President's hasty decision to sack three
ministers and suspend parliament. The PM however is losing some of
this support because the crisis has prolonged, resulting in severe
economic consequences. It is therefore high time that our political
leaders learn that political differences should never outweigh
national interest and that all political parties put the country ahead
of their political agendas and work for the greater good of our
months ago the people of Sri Lanka gave a mandate for peace and it is
the bounden duty of our political parties to respect the wishes of the
people. Twenty months after there was a resurgence of the economy,
endorsement from the international community and optimism due to
peace, the business community took the risk and began to invest and
it would be tragic for the country if, having come so far, all the
gains in the past are lost because the President is preoccupied in
trying to cut a deal to remain in power and is not focused on
consolidating the gains made in the last 18 months.
President is focused on taking short term decisions at crisis
management compounding the economic problem long-term. As a result
business confidence is now at a low ebb and international assistance
will not be forthcoming until the resolution of the political crisis.
President should stop portraying the present crisis as a security
crisis and accept the fact that this crisis is essentially stemming
from a miscalculation of the support she had in parliament. Therefore,
in a display of desperation, the PA is now tied up with the JVP. The
PA-JVP alliance will do very little to win back the confidence of the
business community or the international community.
JVP is responsible for thousands of deaths. Their radical ideology and
unions have destroyed companies in the private sector. The only bright
side of this alliance will be that the JVP is a disciplined party and
therefore they may influence the PA to become more accountable to the
country. On the other hand the JVP is also mindful of the fact that
they stand to benefit by working with the PA.
alliance according to political analysts would be suicidal politically
as far as the PA is concerned because the JVP could very well eat into
the PA's vote base. Also certain PA MPs have advised the PA leadership
that aligning themselves with the JVP could destroy its popularity in
the urban areas. The PA and the JVP leadership know very well that the
peace process has to be put back on track fast.
like Wickremesin-ghe has a mandate so she should stop gambling with
the country and work towards supporting the government of the day to
fulfill the peace mandate given by the people. The UNP on the other
hand must realise that the current political crisis will move from bad
to worse unless the two main parties shed their political differences
and unite behind a common vision. However the problem is that PA and
UNF can't see eye to eye on many important national issues.
the final analysis, despite the JVP support to prop up the PA, the
ground reality is such today that the country will be confronted with
a prolonged crisis on the economic, political and social fronts
because of Kumaratunga's hasty decision.
the present trend continues, a fresh election could become a reality,
something the business community does not want at this moment. Lastly,
at least now in this time of chaos and uncertainty we must all realise
that whether we think our blood to be red, blue or green, we are above
all and before everything else Sri Lankans.
confidence: the bleak picture
confidence took a beating for the second consecutive month in January
thanks to the political crisis that drags on.
observes the LMD-ACNielsen Business Confidence Index (BCI), which
plummeted by a massive 23 basis points in the last two months, to
reach a low of 155 in January.
early November last year, the BCI was only one point below the
all-time high of 178, attained in December 2002.
observed last month that "unless our politicians start acting in
the national interest soon, the BCI is likely to move in the direction
of the 11-month low of 152, in July last year," and the business
magazine laments that its prediction has materialised.
unique business confidence index further asserts that the investment
climate in the country continues to be viewed with much pessimism.
Only 67% of those polled stated that our prospects are either
"good" or "fair" (almost 90% said so in November).
the latter respondents polled, only a discouraging 15% - down from a
healthy 50-odd percent two months ago - felt that the prevailing
environment is "good."
latest edition of the LMD-Nielsen BCI shows, however, that the
medium-term outlook is being viewed with more optimism.
44% of those surveyed expected "the economy, in general, to
improve in the coming 12 months." This is an increase of seven
percentage points from last month, but well short of the 60% who said
so a month earlier.
clear majority of businesspeople surveyed - some 60% - also continue
to acknowledge that their "company's business" (or sales
volumes) increased from 12 months ago, and more than half of
ACNielsen's sample still expect business "to get better in the
current edition of LMD comments: "The writing is on the wall for
the shorter term, at least. The unceremonious events of last November
and the political wrangling that has followed will take many months to
recover from - if and when our politicians start acting in the
Bank' accolade for Deutsche Bank
Bank, Europe's second-largest bank by assets, recently won the
accolade of Best Bank of 2003, which was awarded by the International
Financing Review (IFR) magazine based in London.
magazine, in giving out the award, said: "In 2003, Deutsche
developed a relentless and urgent drive to succeed. It was aggressive,
fast moving, innovative, and highly results focused. The big change in
Deutsche's investment bank in 2003 was the alignment of core
businesses along a single strategic track. On the strength of its
performance in 2003, the bank looks to have embodied the drive,
vision, passion and commitment necessary to be a bulge bracket player
in global corporate and investment banking."
award underscores the strength and breadth of Deutsche Bank's global
platform; this is well demonstrated in its widening global bond
franchise. According to figures compiled by Bloomberg, Deutsche Bank
and just one other bank are the only financial institutions to have a
global market share of over 8%. The nearest rival has a 5% share.
Bank's global market share for last year stood at 8.3%, a 2.47%
increase over 2002's recorded market share of 8.1%. Deutsche Bank has
underwritten international bonds amounting to US$ 181.16 billion last
year, compared with US$ 134.485 billion in the previous year.
Bank's US dollar bond franchise has continued to make significant
strides, largely due to continued investment by the firm in trading,
sales and research expertise. Market share has risen steadily in the
league tables in US Debt from No. 10 in 2000 to No. 5 this year
(September year to date).
Country Officer, Deutsche Bank (Sri Lanka), Stefan Mahrdt said,
"Deutsche Bank has developed well beyond its traditional European
strength and this shows the confidence that US and non-US borrowers
have in Deutsche Bank's ability to place US dollar denominated
coaches from China
Chinese proposal to supply and assemble stainless steel railway
coaches to the Sri Lanka Railway Authority (SLRA) by China National
Machinery Import and Export Corporation (CMC) was presented to
Transport, Highways and Aviation Minister, Tilak Marapone last month.
Chinese offer comes with a complete credit package against the
government of Sri Lanka guarantee.
Chinese proposal to modernise the SLRA is not limited to the supply of
railway coaches but to provide the advanced coach building technology
to Sri Lanka by establishing a modern railway assembly workshop in
collaboration with Colombo Dockyard Ltd. and International Industrial
Trade Promotion Consortium.
proposal will be implemented in stages, initially to supply complete
built up coaches and thereafter to progressively assemble railway
coaches in Sri Lanka. The modern railway workshop will provide
employment for skilled labour and utilise local raw materials.
CMC is one of the top 10 trading companies in China and a
wholly state-owned company.
is the first Chinese company to have exported Chinese made railway
rolling stock including passenger coaches, locomotives, spares,
freight wagons, etc., to more than 30 different countries such as USA,
UK, Botswana, Zimbabwe, Egypt, Pakistan, Bangladesh, Thailand, Iran
and Sri Lanka. Presently 95% of the Chinese railway requirements are
provided by CMC.
to decide on third player in three weeks
deadline for submission of final proposals and technological bids for
the selection of the third player in the petroleum retailing market in
Sri Lanka closed last Friday. According to the Director, Public
Enterprise Reform Commission (PERC), Chandu Epitawala, the bids were
expected to be presented to the technological evaluation committee.
the technical evaluation report is submitted, the cabinet appointed
committee would then call for and review the financial bids. Epitawala
said that the evaluation of both the financial and technical bids
would take about two weeks allowing for the holidays in between.
about the third week of February PERC is hopeful of selecting the
third player. The new entrant will start operations in the market only
around the end of March this year, once it has received cabinet
approval and the relevant funds are organised.
eight shortlisted companies vying for selection are Shell Overseas
Investments B.V., Petroleum Nasional Berhad (Petronas), Hindustan
Petroleum Corporation Ltd., Reliance Industries Ltd., International
Petroleum Investment Company (IPIC), Bharat Petroleum Corporation
ltd., East West Petro Products Limited and Sinopec (HK).