According to the statement submitted to the CSE, the process of acquisition of 78 percent of the voting shares of Ceylinco Savings Bank was initiated in April 2009 with an investment of Rs 100m at a price of Rs one per share.
Thereafter, the acquired entity was renamed as MBSL Savings Bank to infuse public confidence and gain credibility.
An additional Rs 150m has been infused to acquire 72 percent of the non-voting shares, taking the total investment to Rs 250m.
With the unanimous decision of the Board on September 2, 2010, Rs 12.8m of the voting shares have been disposed of at a price of Rs 3 per per share, thus generating a profit of Rs 25.6m to MBSL.
Similarly, the unanimous consensus of the Board has been reached for the disposal of the balance 68 percent voting shares at a price of Rs 3.75 per share and the entire 100,000,000 non-voting shares at a price of Rs 2.35 per share being the best possible price negotiated by the committee appointed by the Board,
based on the valuation obtained from Price Waterhouse Coopers for the purpose of the merger and the sale prices were far in excess of the valuation. This transaction will also result in a profit of Rs 325m to MBSL.MBSL Savings Bank continued to run at a loss despite efforts made by MBSL to revive the Bank.
Hence, if MBSL did not decide to dispose of the acquisition at this stage, it would have been required to immediately invest a further Rs 1.3b to meet the capital adequacy requirements of MBSL Savings Bank according to Central Bank requirements of Sri Lanka.
The Board of directors has stated that the Bank has followed all relevant procedures in taking this decision, at the Board level and communicated this decision to the parent company, the Bank of Ceylon and the regulator, the Central Bank of Sri Lanka and obtained formal approval from the Bank Supervision Department and the Non- Bank Supervision Division of the Central Bank of Sri Lanka, which is the direct regulator of MBSL.
Details of this transaction were reported to the Colombo Stock Exchange (CSE) in October 2011.