Financial Times

New owners seek more places on Lihiniya board
The new owners of Lihiniya Surf Hotel plan to change the main board of directors to have better representation from Hemas and Perigreen. They have also asked its developer and longstanding shareholder, George Ondaatjie to give details of the monies owed to him by the company.

"We will be reconstituting the main Board of Lihiniya Surf Hotel to have representations from Hemas and Perigreen," said Anura Lokuhetty, Director of Lihiniya Surf Hotel owning company Associated Hotels Co Ltd. (AHCL).

The new owners want Ondaatjie to resign from the chairmanship of the firm but offered to retain him on the Board if he wishes to, for which he has not given a definitive answer.

This new turn of events came about when Ondaatjie asked Gardiner to pay the Rs. 20 million owed to him. He has refused to resign from the chairmanship until then.

"I must look after my interests as well," Ondaatjie said, adding that it will cost around Rs. 50 - 60 million to revive the hotel. Ondaatjie said that he has sought legal advice on this matter and that they have advised him to claim the money. "We want to peacefully hand over Lihiniya Surf while claiming what is due”, he said. CHC chairman Bodhi Ranasinghe said that what is due to Ondaatjie will be paid.

The Securities and Exchange Commission (SEC) is still probing into the controversial deal of Lihiniya Surf Hotel owning company Associated Hotels Co Ltd. (AHCL) which has triggered much speculation in the market about the authenticity of the transaction. An auditing company has been appointed by AHCL on the request by Perigreen and Hemas, according to Sanjeev Gardiner of the Gardiner Group. He said the liabilities reflected on the balance sheet to any entity will be duly dealt with. "The liabilities have to be identified as being due in order to be paid," he told The Sunday Times FT. SEC officials said that even though the trading procedures have not been violated, the takeovers and mergers code of the regulator has been triggered with this transaction by Hemas Holdings.

They said that Hemas has sent the offer document to the SEC for a mandatory offer in compliance with the regulations. SEC is also examining the transaction to find out whether any provisions in Colombo Stock Exchange and SEC codes have been violated.

Market watchers speculate that Ceylon Hotels Corporation's (CHC) 35 percent direct stake in AHCL may have been diluted when it was transferred to Perigreen Ltd, a Special Purpose Vehicle (SPV) floated together with Sanjiv Gardiner/Galle Face Hotel Group interests.

This might make it difficult for CHC to exit the investment in keeping with the government's objectives of disposing of its equity stakes in listed and unlisted enterprises. As per SEC regulations, subsequent to the Hemas transaction, a general offer for the shares has been made but since CHC is locked in with Perigreen, they might not be in a position to take part in it.

The general offer could have helped them realise nearly Rs. 70 million but the value of their stake might have diminished with its transfer to the SPV. However, CHC chairman Bodhi Ranasinghe said that there was no cash transaction and that merely a reorganisation of Lihiniya Surf Hotel was performed.

"Only a transfer of shares took place and there is no value attenuation involved," he said. Ranasinghe added that it was not a sale per se but an exercise to facilitate a stronger holding company exercising legitimate control. The Gardiner Group secured an AHCL parcel worth of 2.4 million corresponding to 47 percent at Rs. 28 per share as a crossing. Soon after the crossing a parcel of 200 shares traded at Rs. 42, up by Rs. 14 from its previous close.

Hemas Holdings subsequently bought 2.6 million shares at Rs 40 per share in AHCL for Rs 104 million from the Mercantile Investments Group controlled by Ondaatjie.

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