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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » GRI becomes largest single shareholder of Ceylinco

GRI becomes largest single shareholder of Ceylinco

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Melissa Pereira


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
In a new turn of events in the continuing saga of Ceylinco Insurance, informed sources indicate that Ciesot (Private) Limited, the employee share ownership trust of the Ceylinco Insurance has divested some of its shares in a deal that analysts say "has permitted the company to retain control over its affairs."

The sources who wished to remain anonymous said that Shriram Capital of India had picked up 6.3% of the shares divested while Banque Pictet & Cie SA had bought 1.5% and Commercial Credit PLC, a Sri Lanka incorporated company, had purchased 1.5% of the shares divested by Ciesot.

"I haven’t seen the shareholder register but if this information is correct, GRI which was previously the largest single shareholder along with its subsidiaries is now the single largest shareholder of Ceylinco Insurance," said Prabash Subasinghe, Managing Director, GRI.

"They also hold the record for being the largest shareholder of a public quoted entity without board representation," said K.C. Vignarajah, who is a minority shareholder rights activist promoting good governance among quoted companies.

GRI and its associates collectively hold over 29 percent of Ceylinco Insurance, just short of the 30% threshold that triggers the mandatory offer requirement.

Meanwhile, a Consortium of both local and international companies of which Global Rubber Industries was not part had previously bid for the Ciesot shares at Rs. 1,600. They had been sold at Rs. 1,602 in last week’s mega deal on the CSE which drove turnover to over Rs. 5 billion.

Subasinghe confirmed "GRI was not part of that consortium though that was, I believe, a genuine consortium of professional investors who had made that bid."

"Well, a lot of people think they have sold them to ‘friendly parties’ and that is why they sold them for Rs. 1,602 and not Rs. 1,600," commented a broker in Colombo who also requested anonymity.

Another observer in Colombo noted that "It is interesting that Shriram Capital of India is upping its stake in Ceylinco Insurance given that Ceylinco — Shriram here wound up its operations after failing to pay its depositors with at least one of its then directors, a trusted aide of the Kotalawelas, currently out on bail if my memory serves me right"

Meanwhile the Supreme Court had said: "We have been informed that during the period leading up to September 28, 2009 several Ceylinco Group Companies have disposed large quantities of shares of Ceylinco Insurance and that PICTET AND CIE have been purchasing directly from the Ceylinco Group of Companies. It could well be that these shares have been purchased for the purpose of maintaining

control of the Ceylinco Insurance and that the shares were purchased from the shares disposed of by Ceylinco Group of Companies."

The courts further suspected that Pictet was a proxy for the then Chairman of Ceylinco stating "We also take cognizance of the fact that Mr. J. L. B. Kotelawala has been in control of the Ceylinco Insurance prior to the collapse of Golden Key and that Mr. Kotelawala is also a controlling member of the Board of Trustees of CIESOT and that, it is therefore, highly probable that the said shares have been purchased by PICTET AND CIE for and on behalf of Mr J. L. B. Kotelawala."

Ciesot’s shareholding had been used by Ceylinco Insurance to control the -company. Mr. Vignarajah observed that "in submissions before court it has also been revealed that of the five trust funds including Ciesot holding Ceylinco insurance shares, the trust instruments in at least two trusts, themselves have placed caps on what can be invested in the company, one of which had been subsequently revoked.

"These trusts investing in their own companies are tantamount to ‘capital reduction.’ Secondly you are increasing control over the board," observed Vignarajah.

Commenting on these matters, he said "It is accepted good governance to ensure that risk exposure is minimized. Using these trusts to obtain control of board affairs is ridiculous."
Courtesy: Sunday Island 16 May 2015

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