People’s Leasing buys 80% stake in Seylan Merchant Leasing for Rs. 441 m

People’s Leasing Company Limited, the market leader in Sri Lanka’s leasing industry last week acquired 80% stake in Seylan Merchant Leasing PLC.
On Friday, a block of 19,194,014 shares (percentage 84.5%) of Seylan Merchant Leasing PLC was sold by Seylan Merchant Bank at Rs. 23 each.
This move, which has the fullest co-operation and support of the Central Bank, now brings SMLL under the ownership of People’s Leasing and has served to reinstate confidence among stakeholders and the financial services industry within the country. With the acquisition of SMLL, a registered finance company, People’s Leasing now has three subsidiaries under its growing umbrella, which also includes People’s Leasing Fleet Management Limited and People’s Leasing Property Development Limited.
People’s Leasing has continued as market leader in Sri Lanka for seven years, displaying financial stability, consistent customer confidence and the backing of the state owned People’s Bank as distinct advantages that have contributed towards its significant growth performance. The upheavals seen in the financial services industry during the latter of 2008 saw an immense erosion of confidence among customers and other stakeholders about the industry in general and the privately owned companies within the industry in particular. There was a natural tendency therefore for the investor public to move towards the strength and stability of the state sector. This growing confidence paved the way for People’s Leasing to attract new sources of financing and growth.
People’s Leasing selected SMLL after a thorough analysis from a list of companies offered for consideration and according to a People’s Leasing spokesman, SMLL’s listing on the Colombo Stock Exchange proved to be one of the more advantageous factors for selection. The listing will infuse substantial benefits for the People’s Leasing Group and be an positive avenue for prospective investors looking to invest in a sound and secure group of companies. Financial Due Diligence was conducted by Messrs Ernst & Young, one of the world’s largest audit firms renowned for their consistency and accuracy, while Messrs. F J & G De Saram, Sri Lanka’s pioneering law firm performed the legal groundwork. NDB Investment Bank performed the valuation and the expertise of Deutsche Bank AG Colombo was brought in as Escrow Agent.
On affirming People’s Leasing ratings, FITCH Ratings Lanka on March 13, stated : “The affirmation of PLC’s rating is underpinned by the agency’s expectations that its credit profile is unlikely to be materially affected due to this acquisition. Fitch believes the firm’s (PLC’s) stronger financial profile should be able to comfortably absorb SML, which accounted for only 9% of the “consolidated entity” assets. For instance, even in the highly unlikely event that would require PLC to write off all advances on SMLL’s books, PLC’s net NPL/Equity ratio is expected to remain comfortable for its current rating at approximately 10% (based on the financial position of both companies at December 31, 2008) compared to 5% on a standalone basis.”
The newly appointed Board of Directors at SMLL comprise Chairman of People’s Bank W. Karunajeewa, Directors of People’s Bank D.J.D Jayakody and A.P. Weerasinge, CEO/GM of People’s Bank P.V. Pathirana and CEO/GM of People’s Leasing D. P. Kumarage.