AIA Company Limited (previously American International Assurance Company Limited) which has made a voluntary offer to acquire all the issued and fully paid ordinary voting shares of AIA Insurance Lanka PLC will go up to an offer price of Rs.400 per share if more than 90% of the minority shareholders accept their offer.
AIA which is incorporated in Hong Kong is 100% owned by the AIA group which comprises the largest independent publicly listed Pan Asian Life Insurance group in the world.
The group has operations in 16 markets in the Asia-Pacific region with wholly owned branches and subsidiaries in Hong Kong, Thailand, Singapore, Malaysia, China, Korea, the Philippines, Australia, Indonesia, Taiwan, Vietnam, New Zealand, Macau, Brunei, a 26% joint-venture in India and 92.3% effective ownership in a subsidiary in Sri Lanka - AIA Insurance.
Analysts interpreted the circular as one that would encourage shareholders to accept the offer and exist as it clearly outlined that there will be lower dividends and capital calls on shareholders down the road. Also, the company intends eventually delisting from the CSE.
AIA has said that its future business plans in Sri Lanka may need additional capital from time to time that will not be supported solely by the expected profits and other assets held by AIA Insurance.
They may make additional capital contributions to fund the business plans and as a consequence, shareholders not taking up pro-rata rights entitlements in the future "may find their equity shareholdings diluted in a progressive and continuing basis."
"Given AIA’s focus on enhancing growth and returns from AIA Insurance, AIA expects to reduce the levels of dividend payments to shareholders of AIA Insurance going forward in order to utilize available excess cash flow to reinvest in the business to support the growth plans for AIA Insurance.
``As a consequence, those shareholders that have historically relied on AIA Insurance as a regular dividend paying security may find that the levels of expected dividends to be significantly lower in the foreseeable future,", minority shareholders have been told.
"It is AIA’s ultimate objective, subject to legal and regulatory requirements currently in force or as applicable in the future and having obtained all necessary regulatory approvals and clearances to proceed to a delisting of AIA Insurance from the Colombo Stock Exchange.
``This is consistent with the target operating model followed by AIA Group Limited, the parent company of AIA which would normally involve holding its insurance operating units as wholly owned private companies wherever possible and permissible, while only the ultimate parent company (in this case AIA Group Limited) would be a publicly listed company," the circular said.
The Rs.349 price is the highest at which AIA directly purchased shares of AIA Insurance within the three-month period preceding the date of the offer. This would mean that the minority will get a better price than the NDB and its associates who sold out at that level should 90% acceptances lead to the Rs.400 price.