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FINANCIAL CHRONICLE™ » FUN CHRONICLE™ » How a Hayleys – Aitken Spence merger was foiled in 1970

How a Hayleys – Aitken Spence merger was foiled in 1970

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* Retired Aitken Spence Group Chairman, Founder LOLC Chairman Charitha Prasanna de Silva reminisces his corporate life and other career milestones

Charitha Prasanna de Silva (known as Chari to his friends), the former Chairman of Aitken Spence and LOLC is now 83 years old and in virtual retirement. His life and career have been full of incident and have many lessons for the aspiring Manager or Entrepreneur.

In his early youth his mother taught him chess and that became an abiding love throughout his life. He claims that it conditioned him into planning ahead. He was always able to put himself into his adversary’s shoes, and figure out his plans and aspirations. That ability is what results in empathy, a key component of emotional Intelligence that is now recognized as one of the secrets of success in life.

He was a voracious reader at the age of ten, devouring a hundred books a year. His favourite authors were Edgar Wallace, Agatha Christie, Sir Arthur Conan Doyle and others of the same ilk. He became a facile writer which helped him in his exams and later in his professional career.

He had an illustrious school career, ending up with three successive Form Prizes and five distinctions in his Senior School Certificate Exam; the largest number of Distinctions from Royal College that year.

At the University of Colombo he read for an Honours Degree in Chemistry but missed a First Class because he spent most of his time playing bridge, chess, table tennis and tennis, instead of studying (as he should have done) in the library. But this resulted in a career shift that changed the course of his life. He ended up as a Chartered Accountant at Caltex Ceylon Ltd earning a salary that enabled him to get married to the girl he had fallen in love with. Philosophically a liberal thinker he saw no difficulty in getting married to a Tamil Christian. No obstacles were placed in his path and he married in 1957 and later fathered three children, two boys and a girl who all did well in life and were a great source of comfort to him. He lost his wife, Susheela, to a rare disease in 1999 but did not let the tragedy destroy him.

Caltex Ceylon…

His first job was with Caltex which he joined in 1955 as an Accountant and left in 1963 (when its assets were taken over by Government) as Deputy Chief Accountant. He had two fascinating experiences at Caltex from which he learnt life-long lessons. The first was when it became apparent that the Leftist inclined government of Mrs Sirimavo Bandaranaike was planning to take over the three Oil companies Shell, Esso, and Caltex. The Petroleum Corporation had been formed to run the industry and it was headed by two clever leftist public servants, Sam Silva and Silva. They were publishing articles claiming major savings in foreign exchange that the government would make from the take-over. He saw many flaws in their arguments but his boss, Harry Bernard, would not let him refute them for fear of angering Mrs Bandaranaike. On a Monday, Caltex got reliable information that a gazette was to be published on Friday, taking over the Caltex Installation at Bloemendhal Road. At this point Bernard gave him permission to write anything he wanted. He wrote a strong article pointing out the fallacies in the arguments that had been put forward and the dangers of reprisals (including the loss of tea markets) that could follow a take-over. The tone of the article could be judged from one sentence he still remembers:

"For Mrs B to maintain that it is not her intention to get rid of the oil companies but only to bring down the price of oil imports, is like cutting a ladder from under a man’s feet and saying that the intention was not to bring him down but to collect some firewood!".

Bernard was pleased with the article but rather nervous about the tone. He wanted de Silva to show it to Blamey, the head of Shell, who was on the first floor of the building. Blamey read the article and so liked it that he sent de Silva with it to Mason, the head of Esso who was a block away. Mason was so delighted with it that he insisted on de Silva’s sitting down in one of their offices and writing an article for him. And so it came about that on Wednesday (Cabinet day) two centre page articles under the names of Bernard and Mason appeared in the Ceylon Daily News.

For what happened at Cabinet, de Silva was indebted to his cousin B.P. Pieris, Cabinet Secretary, who told him the story after his retirement. Mrs B had stormed into the Cabinet Meeting waving the CDN in her hand and blasted then Minister of Industries and Scientific Affairs T.B. Subasinghe asking him whether he was trying to bring her government down! She had demanded that the takeover of the Caltex Installation be cancelled and Sam Silva and GVS ("Phillip’s men!") should be dismissed. All of this took place and imminent disaster was averted.

The lesson de Silva learnt from this affair was that when something unfair or foolish was about to be done good men should resist it. People should be prepared to stand up and be counted. "The only thing necessary for the triumph of evil is for good men to do nothing" as Burke would have it. The other lesson was that Governments are fearful of public opinion, and a free press is a weapon to be used.

A third lesson he learnt was after the legislation for the takeover was published. The Chief Accountant of Caltex was a charming Englishman who preferred producing plays to getting involved in the Compensation Claim consequent on the Takeover that eventually took place about a year later. The Caltex expert from New York, Jim Wollahan, picked on de Silva to assist him. When they consulted Byrnell, the legal expert from Julius and Creasy, he told them bluntly that the legislation was so framed that the oil companies would get practically nothing for the assets taken over. Compensation was to be the purchase price less depreciation. Market price would be paid only if the purchase price was not determinable. Since most of the assets were more than ten years old the assets would be fully depreciated, and market price was out because the oil companies kept meticulous records.

Wollahan and de Silva returned to office thoroughly dejected. But they were not satisfied and discussed the matter from every angle. After a long, tiring discussion Wollahan suddenly announced " de Silva, it will be Market Value! We did not purchase our biggest assets, our Terminal and our Service Stations. We built them!" de Silva wrote the Memorandum on "Why Purchase Price is not Determinable", and the Oil Companies were able to claim market value for their assets, a huge difference running into millions of dollars.

The lesson de Silva learnt from this affair was that businessmen should not blindly accept what they are told by lawyers. They must use their own judgement.

Aitken Spence

From Caltex de Silva moved to Aitken Spence in 1963 as its Chief Accountant. When Gaddum of Aitken Spence first offered him the same job in 1955 he advised him to accept the offer that he had from Caltex as Aitken Spence was a "petty, parochial firm" in comparison. He had subsequently declined an offer from Thornton of Aitken Spence in 1962 because he was heavily involved in the Compensation Claim for Caltex at that time. When a third offer came from Jack Reeves in September 1963, he thought it was too much like fate, and accepted it.

Within five years he was made Finance Director, and by some extraordinarily fortuitous circumstances, he became Chairman and Managing Director in 1972. One Chairman, Roy Hinton, returned to England, and the next Chairman, Eldsworth Van Langenburg emigrated to Australia after his senior colleague, Louis Samarawickrema met with a tragic death.

Between 1972 when he became the CEO and 1982 when the company went public, Aitken Spence expanded and diversified dramatically. The diversification was based on a simple strategy: every new venture must either earn foreign exchange or give substantial employment. He knew that any government whatever its political complexion would support a company that provided foreign exchange or employment. He scrupulously avoided any activity that involved government tenders because success in such ventures usually required bribery. He was known to be apolitical, and therefore enjoyed the goodwill of both parties. The company had a spotless reputation for probity.

In 1974 taxation under the leftist government was so rigorous that any reasonable tax incentive was seized upon. That was the reason Aitken Spence went into hotels. Although it knew nothing about hotels it was already engaged in inbound tourism so that hotels were a logical extension. The first hotel, Neptune, in Beruwela, designed by Geoffrey Bawa, was a great success. However it never had an official opening because he knew that those who were not invited to it would nurse a grudge. For similar reasons when Singapore Airlines appointed Aitken Spence as its General Sales Agents, he never organized an inaugural flight. His personal relations with key Leftists such as Bernard Soysa and Doric de Souza were such that he was invited by Bernard to speak on "Evaluating Public Sector Performance" at the Central Bank, and asked by the SLBC to give a radio talk on "The Fischer/Spassky Chess Match" together with Doric. Doric and he had played many games of Chess during his University days.

By 1982 the growth of Aitken Spence had been so phenomenal that the Hong Kong based business magazine "Asian Business" interviewed him and had him on its cover. Upali Wijewardene had appeared on their cover in the previous year, and the two of them were invited to Hong Kong to speak to a gathering of businessmen there. His subject was "How a Traditional Agency House was converted into a Conglomerate". He drafted the speech and was about to embark on a flight to Hong Kong when the whole event was cancelled because Upali and his entourage went down in the Straits of Malacca in his private jet.

In 1982 he decided to take Aitken Spence public. He then did something extraordinary. The advice of his financial advisers was that the assets of Aitken Spence should be revalued and the Capital Reserve created thereby should be capitalized by a 3 for 1 Bonus Issue before 20% of the shares were offered to the public. He realized that the three junior directors of Aitken Spence had much fewer shares than the four senior directors including himself. What he next did is probably unparalleled in the history of this country’s corporate life. Three months before the impending Bonus Issue he persuaded his three senior colleagues to sell one tenth of their shares to the younger directors at par.

This was the very antithesis of Insider Dealing and would appear to be sheer folly, bordering on lunacy, to those business men who now maintain that Insider Dealing is the way to go. It was an act of unparalleled generosity for which his three senior colleagues deserved full credit for agreeing to his suggestion without demur.

He recalls that he saved Aitken Spence from near disaster on a couple of occasions. The first was when, anticipating Government legislation, he persuaded his Chairman, Van Langenburg, to let him visit Ellermans their Shipping Principals who owned 17% of their shares. He met Sir Dennis Martin-Jenkins of Ellermans in London and persuaded him to sell those shares back to Aitken Spence at a valuation by the company’s auditors, lest Aitken Spence be adversely affected by the impending legislation that he anticipated. Sir Dennis whom he was meeting for the first time, readily agreed although there was no certainty about the legislation. A few months later his fears materialized and the Licensing of Shipping Agents Act was passed. All Shipping companies that had any foreign shareholding had to cede 40% of their shareholding to the government. Aitken Spence was the only company that escaped unscathed.

The second occasion was when as a result of a chat on the golf course between Van Langenburg and Bobbiese of Hayleys, Lal Jayasundera visited him with a view to Hayleys (the bigger company) merging with Aitken Spence. He was expected to value the shares of Aiken Spence that was a private company then. The valuation of a private company’s shares is not a straightforward undertaking. He used every subterfuge possible to value the Aitken Spence shares at as high a level as possible. Lal, who later became the Chairman of Hayleys, realized that he was against the merger, and advised Bobbiese to drop the idea. Lal told him many years later that in his view there was no future for a merger with Aitken Spence if the man who was destined to lead it was against it. Lal was to become one of his closest and most respected friends in the private sector.


De Silva’s last major corporate undertaking was the creation in 1980 of Lanka Orix Lanka Company the first leasing company in the country. The IFC (the private sector window of the World Bank) saw the need for an equipment leasing industry in the country and approached him to be the first Chairman. He agreed on the basis that the first MD would be a Japanese from the largest leasing company in the world, Orient Leasing Company, later to become ORIX Corporation. Orix was to have 30% of the shares and the Bank of Ceylon (on whose board he then was) would have 15%. The NDB, DFCC and Insurance Corporation would also have shares and places on the board. De Silva was expected to raise matching share capital from the private sector, and did so by telephoning respected friends such as the Chairmen of Unilevers, Ceylon Tobacco, Siedles, and others. He scrupulously kept the contribution from Aitken Spence at the same level. Within two years the company went public and never looked back.

Within a year he started the first Factoring company in the country. He thus pioneered two entirely new financial industries both of which are thriving.

After over twenty years as Chairman of LOLC he retired some years after the company was taken over by Ishara Traders a domestic, indigenous family firm. His almost over scrupulous attitude towards Insider Trading can be judged by the fact that after over twenty years at the helm he had less than five percent of the shares when he retired. Most businessmen would dismiss this as naivete if not unmitigated folly.

This feature has concentrated on his direct contributions to the Corporate Sector as a Manager and entrepreneur. He looks upon himself more as a Manager than a Businessman and is glad he has escaped the main temptation of many businessmen – greed.

Trade Chamber appointments, accolades

While he was engaging in all this management and entrepreneurship he was appointed by his peers to various high positions in the private sector. He was made Chairman of the Employers Federation of Ceylon, The Ceylon Chamber of Commerce, and The Sri Lanka Business Development Centre. At the Chamber he drafted the section on "Obligations of Directors to their shareholders" in their Code of Ethics. He also drafted what was dubbed "The De Silva Code of Governance for Committees" which has been adopted by a number of institutions in the private sector. For his services to the Chamber he was made an Honorary Member.

He was the first President of the first Bilateral Business Council, The Sri Lanka-Japan Business Co-operation Committee in 1978. For his services there he was honoured in 1988 by Emperor Hirohito with the ‘Order of the Rising Sun, Gold and Silver Star’. It was the highest honour given by Japan to a foreigner. Some previous recipients were US President Ronald Reagan and British Prime Minister Margret Thatcher.

In 2006 he was appointed Chairman of the Securities and Exchange Commission by President Chandrika Kumaranatunga who later bestowed the Honour of Deshamanya on him.


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Good article Sri, thanks for sharing


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Worth to read this type of articles rather than wasting time on gossipping threads.
Thanks for sharing.
Hat off to The Island.


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
excellent article. thanks for sharing


Aryuboo Wewa (May you live long!) Charith. Thanks Shri for sharing an excellant article.

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