NDB Capital goes for Rs. 6 b worth buyback offer

• 1 for 4 basis move at Rs. 545 per share aimed at redistributing hefty capital gains from recent sale of strategic stakes

NDB Capital yesterday announced plans of a share buyback arrangement costing Rs. 6 billion as part of redistributing hefty capital gains achieved from recent sale of strategic stakes.

The move, subject to shareholder approval, is following adoption of new articles of association by the company also via an EGM fixed for 1 March 2013. NDB holds a 99.6% stake in NDB Capital, whilst there are around 370 shareholders of whom 336 hold between one and 1,000 shares.

In a filing to the CSE, the company said the Board of Directors of NDB Capital yesterday resolved to recommend to the shareholders to adopt the new Articles of Association, in substitution for and to the exclusion of the existing Articles of Association l to ensure effective compliance with the provisions of the Companies Act No. 07 of 2007 as well as to take advantage of the various benefits afforded to companies by the Act.

In view of the monies realised by NDB Capital from certain recent divestments in investments held by the company, the Board of Directors, subject to the adoption of the new Articles of Association, the approval by the shareholders of the company as a major transaction in terms of Section 185 of the Act, and the receipt of a Solvency Certificate from the auditors of the company, has resolved that up to a maximum of 10,963,751 ordinary shares (25%) from and out of the 43,855,007 ordinary shares of CDIC in issue be repurchased from the holders of such shares as at the end of trading on 1 March 2013 (the entitlement date) by offering to acquire one ordinary share for every four ordinary shares held by such holders of ordinary shares of CDIC, subject to the following terms:

maximum number of shares to be repurchased 10,963,751 ordinary shares on the basis of one ordinary share for every four ordinary shares held

The repurchase is to be carried out at Rs. 545 per ordinary share.

Proposed date of commencement of the offer is 6 March 2013 and proposed date of closing of the offer is 15 March 2013.

The Board has resolved that the acquisition of shares in the manner set out is in the interests of NDB Capital and that the consideration price of Rs. 545 per share to be paid is a fair value in the opinion of Ernst & Young, auditors of the company.

The Board is also satisfied that the company will immediately after the repurchase will satisfy the solvency test as defined in Section 576 of the Act. The certificate of solvency in confirmation thereof has been requested from the auditors.

The company also recommends this repurchase as a major transaction in view of the fact that the repurchase of shares so envisaged and accepted by all holders of such shares would amount to a disposition of more than half the value of the assets of the company.

Despite the announcement, the share price of NDB Capital closed at Rs. 487.60, down by Rs. 10.80 but it hit an intra-day high of Rs. 510 with 2,849 shares traded. The biggest beneficiary from the move, NDB saw its share price gain by Rs. 3.80 to close at Rs. 148.90 after peaking to Rs. 149.

NDB Capital said it achieved Rs. 6.7 billion capital gain from the sale of entire shareholding in Aviva NDB Holdings and Aviva NDB Insurance to AIG. This gain is non-recurring in nature and the Board resolved that Rs. 5.97 billion should be returned to shareholders by way of a share purchase. This will enable shareholders to optimise their returns by channelling the cash returned to preferred investments of their choice. The share buyback would also enhance the Return on Equity of the Company which in turn would benefit the shareholders overall. NDB Capital is of the view that remaining investible funds after the share purchase would be sufficient to successfully implement the business plan of the Company.