Distilleries announce second phase of restructuring

• 1 into 10 share sub division to boost number of shares in issue to 3b
• Private placement of Rs. 20b worth of shares to Melstacorp
• Reduction of Rs. 17.3b in stated capital

 Distilleries Company PLC (DCSL) which effected one of most innovative restructuring exercises last year on Friday announced its second phase.

The Board has resolved to recommend to its shareholders that the shares in issue of the company at present 300 million to be increased to 3 billion by way of a subdivison of 1 into 10.

Another resolution is a private placement of shares worth Rs. 20 billion i.e  issue 1.6 billion shares to Melstacorp at Rs. 12.50 each.

The share sub division will be done first followed by the private placement. 

The final resolution was to recommend to shareholders a reduction of stated capital of Rs. 17.3 billion of Distilleries. 

Subsequent to measures mooted which are subject to shareholder and regulatory approval, Distilleries’ number of shares in issue will be 4.6 billion. The current stated capital of the company which is Rs. 300 million would increase to Rs. 20.3 billion post private placement and reduced to Rs. 3 billion at the conclusion of the reduction of stated capital. 

The proceeds of the private placement will be used to reduce the liabilities of the Company and improve the negative net asset position of Distilleries. This was on account of the transfer of Rs. 75 billion worth of assets from Distilleries to Melstacorp via a share swap during the first phase. 

The Company has a negative retained earnings of Rs. 29.2 billion as at 30 June 2017, which adversely affect its ability to pay a dividend to shareholders. In terms of the Companies Act the Solvency Test requirements have to be satisfied prior to any dividend distribution in the future. In view of this, the Directors have proposed a reduction of stated capital to wipe out the negative retained earnings of the Company.

Accordingly, the stated capital will be reduced from Rs. 20.3 billion represented by 4.6 billion shares to Rs. 3 billion comprising 4.6 billion shares.

During the FY 17 DCSL PLC ventured into a restructure arrangement under Part ‘X’ of the Companies Act No. 07 of 2007, seeking approval for a share swap that would result in the shareholders of DCSL becoming shareholders of Melstacorp. 

Consequent to the necessary approval from the Court and with the overwhelming approval of the shareholders the 180 degree share swap was completed during the fourth quarter of 2016. DCSL PLC together with other subsidiaries are now subsidiaries of Melstacorp PLC.  As of now DCSL PLC is a standalone liquor company without any substantial holdings in companies in other sectors and all former subsidiaries of DCSL Group now owned and managed by Melstacorp PLC.

The restructure was to bring multitude of benefits to the shareholders including unlocking of Group’s value due to DCSL PLC acquiring beverage sector multiples and through the establishment of an umbrella brand that can be extended to subsidiaries.

The final phase of restructuring will restore the public float of DCSL, making it compliant with the public float requirements as per the Colombo Stock Exchange.