Carson sells rights of Guardian Capital to Guardian Investment for Rs. 223.4 m

Wednesday, 2 March 2011 01:11 - - {{hitsCtrl.values.hits}}

As part of restructuring of Group shareholding in the investment sector, Carson Cumberbatch Plc has sold 99.4% of the Rights entitlement of Guardian Capital Partners (formerly Watapota Investments) to subsidiary Ceylon Guardian Investment Trust for Rs. 223.4 million.

The original entitlement was 21,823,125 shares based on Carson’s holding of 581,950 shares of Guardian Capital Partners amounting to 86.73% stake. The sold quantity was 21.692 million shares at a price of Rs. 10.30 per right. To effect the deal Carson had to feed the market (rest of the entitlement) in smaller lots at higher price originally thereafter coming down in stages. Guardian Capital has announced a mega 75 for two Rights at Rs. 20 each, and the Rights began trading yesterday whilst renunciation is 9 March with last date for acceptance and payment is 10 March.

The rights were priced closely to the prevailing net asset value of the company, which was Rs. 21.25 per share as at 31 December 2010. When the rights issue is concluded, the resulting net asset value per share would work out to approximately Rs. 20.05, based on the published net asset value as at end December 2010.

Given the commitment to subscribe to rights, Ceylon Guardian yesterday bought the rights at a premium to NAV of Guardian Capital.

In the nine months ended on 31 December 2010, Guardian Capital reported a profit after tax of Rs. 0.3 million representing mainly the interest income earned on surplus funds available within the Company amounting to Rs. 20.3 million.

Overall trading of 22 million shares of Guardian Capital (rights) via 1,456 trades made the highest contribution of Rs. 406 million to the market turnover. The share price decreased by Rs. 2,878.40 (99.48%) and closed at Rs. 500. Other shares of Guardian Capital traded between a high of Rs. 3,000 and a low of Rs. 2,000 before closing at Rs. 2,177.80, down by Rs. 735.50.

The company was raising Rs. 503 million via Rights for expanding the capital base of the company to undertake new investment projects mainly in the area of private equity. The first of such investments would be in the shares of Expolanka Holdings Limited, at a total value of Rs. 249.6 million.

Both the rights issue and the investment in Expolanka Holdings Limited (the latter being a major transaction in terms of the Companies Act), were approved by the shareholders of the Company on 18 February.