TJL has announced that they would go ahead and acquire 100% of Ocean India (Pvt) Ltd. for a consideration of USD15.0 mn (LKR2.0 bn). A 50% (USD7.5 mn) of the total amount would be paid in cash while the remaining USD7.5 mn will be paid by way of a share swap with the issue of 35.2 mn TJL voting shares at a price of LKR28.5 to the main stake holders of Ocean India. Therefore TJL’s total share volume would now increase to 696.0 mn voting shares.The main stake holders of Ocean India (OCI) namely Brandix Lanka (75.2%), Jacob BAC (18.5%), CMT (4.1%) and Pioneer Elastics (2.1%) currently holds a total of 35.6 mn shares of OCI. Therefore the acquisition would provide OCI’s main shareholder Brandix Lanka a cash value of USD5.6 mn as well as 26.5 mn ordinary voting shares of TJL. Jacob BAC would gain USD1.4 mn in cash along with 6.5 mn TJL shares. CMT would receive USD310.6k in cash along with 1.5 mn TJL voting shares whilst Pioneer would hold a cash value USD159.5k and 748.5k TJL voting shares.Brandix being the second largest shareholder of TJL with a holding of 29.8% stake (197.0 mn shares) will further increase its’ stake to 32.1%. The total share volume owned by Brandix would edge up to 223.5 mn shares while diluting the stake of TJL’s main shareholder Pacific Textured Jersey (Pacific) to 37.6% against 39.7% prior to the issuing of new shares. Pacific Textured Jersey and Brandix Lanka, the two major shareholders of TJL have made an agreement to maintain a collective shareholding of not less than 51.0% of the issued shares for a period of 5 years commissioning from the 1st of April 2015. With the new share issuing, the collective holding of the two main stake holders would account to 69.7%.Pacific has proposed to sell approximately 10% of total issued shares of TJL (c.66.1 mn shares) held by the company as it would not make any impact on the agreement on the collective shareholding made with TJL accordance to the Company Takeovers and Mergers Code 1995. If the proposed event takes place, 66.1 mn shares would be available for sale whilst further diluting the Pacific’s stake of TJL to 28.1% shifting Brandix Lanka to top the TJL’s shareholder list.The issue would dilute the market price to LKR28.59 with share volume increasing to 696.0 mn. Since the new 35.2 mn shares of the swap would be issued at LKR28.5 with the market closing at LKR28.6 on 29th June 2015, the new market price will only experience a negligible impact whilst the market cap increasing to LKR19.9 bn from LKR18.9 bn.
Courtesy: Soflogic Equity Research
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