Royal Ceramics gains tile monopoly through Rs.2.9bn acquisition
Royal Ceramics PLC (RCL) yesterday bought the controlling stake of its rival tile manufacturer, Lanka Ceramic PLC, in a deal worth of Rs.2.9 billion, carving itself a virtual monopoly in the Sri Lankan tile market.
According to industry sources, following the acquisition, RCL will control as much as 85 percent of the floor tile and wall tile market of Sri Lanka. The country also has imposed higher duties on imported tiles and sanitaryware to protect local production.
A consortium of investors led by Royal Ceramics yesterday bought over 24 million shares amounting to 80 percent of Lanka Ceramic PLC held by CT Holdings PLC at a price of Rs.120 per share—paying Rs.40 premium per share.
The consortium is also believed to have bought the 6.9 percent stake held by Dr Senthilverl, amounting to just over two million shares.
According to Royal Ceramics Managing Director Nimal Perera—who negotiated the deal—Royal Ceramics bought 22.8 million shares of Lanka Ceramic at the end of yester- day’s trading, paying between Rs.89 and Rs.120 per share, while ultimate parent of Royal Ceramics, Vallibel One PLC, controlled by businessman Dhammika Perera bought one million shares.
Also, Nimal Perera and Lanka Ceramic Chairman Anthony Page—who is acting in concert in the deal—bought 1.3 million shares and one million shares, respectively. It is expected that Anthony Page will remain as the Chairman of Lanka Ceramic PLC. He has also been appointed to the RCL board with effect from yesterday.
Lanka Ceramic and Horana Plantation Director P.S.R. Cassie Chitty and Lanka Floortile Deputy Chairman Dr S. Selliah are also believed to have bought over 1.8 million shares of Lanka Ceramic, purportedly acting in concert with the acquirers.
The deal includes the four listed subsidiaries under Lanka Ceramic—Lanka Floortiles PLC, Lanka Walltiles PLC, Swisstek (Ceylon) PLC and Horana Plantations PLC.
“Despite the acquisition, Lanka Ceramic will be run as a separate company, keeping its product identity. But we will be able to increase the efficiency of the firm when it comes to things like procurement, distribution, etc.,” Perera said.
The purchase of Lanka Ceramic became the 13th acquisition effected by DhammikaNimal duo, making them inevitably the most aggressive corporate figures in the post-war Sri Lanka, who have expanded their business empire to unparalleled heights.
Meanwhile, analysts estimate that CT Holdings is likely to have booked a capital gain of Rs.750 million through its divestment of shares.
However, analysts pointed out that it would be interesting to find out CT Holdings’ plans for the money raised through the sale.
“They (CT Holdings) have a few logical options. They could either invest the money in their upcoming bank (Cargills Agriculture and Commercial Bank) or settle the debts incurred due to acquisitions the group made during the last few years,” an analyst who preferred anonymity told Mirror Business.
As at December 31, 2012, CT Holdings’ interest bearing short-term borrowings had grown to Rs.6.4 billion from Rs.4.4 billion at the end of 2011.
Attempts made by Mirror Business to contact top officials of CT Holdings PLC on the matter proved futile.