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Editorial

Delisting Nestle Lanka PLC

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Except for perhaps some 6,000 plus Nestle Lanka minority shareholders and stock market participants including retailers, many of them pensioners with time on their hands and not much capital resources to play the market, would have been interested in the recent announcement by Nestle Lanka PLC which has been quoted on the local bourse for 40 years that they plan to delist. But the question arises whether such a decision by a multinational company which has had a global presence for over 150 years and is one of the world’s biggest food brands, is fair to the minority shareholders of their Sri Lanka incorporated company. Nestle boasts it has been present in this country for over a century and the brand is a household name not only here but in many parts of the world. That was a factor that attracted investors to buy its shares when it was first listed on the Colombo bourse. But now, four decades later, they plan to delist.

It must be said in fairness to the company that it has announced that it will be paying a dividend of Rs. 75 a share to its shareholders, probably the biggest ever declared on the Colombo Stock Exchange, prior to its delisting. Analysts and market observers believe that this is a way of paying out all the cash in the company to its present shareholders before it becomes an unquoted subsidiary of its Swiss parent, Nestle SA. Alongside its directors’ delisting proposal, the company has announced its intention to pay Rs. 1,500 per share to the minority which the company says is an “attractive and fair premium.”

But, as a correspondent to a financial daily wrote a few days ago, the mere announcement that the company, subject to regulatory and shareholder approval, will delist is not the end of the story. The directors recommendation can still be rejected by the shareholders, he has noted. This happened twice in recent times. First, the quoted Bank of Ceylon subsidiary, Property Development PLC (previously PDL) that owns the banks headquarters building, and AIA, the insurance multinational were rejected by minority shareholders on a ‘one man one vote principle’ against ‘one share one vote’ which generally happens where members are polled at company meetings. In AIA’s case, a price of Rs. 2,500 a share against an original exit offer of Rs. 1,000 was eventually paid.

The delisting of PDL was in limbo for as long as five years after the proposal was first announced. In the case of that company, it ultimately delisted by paying Rs. 183 per share, up 40% from Rs. 130 offered in 2018. The PDL share, of course, did not enjoy the capital appreciation that the Nestle share did, nor did it pay very high dividends like the latter. Finally PDL itself, and not the Bank of Ceylon – its predominant shareholder – bought out the minority.

Although Nestle was unable to pay dividends to its shareholders in the early years as a listed company, investors who were patient were delighted to see in later years capital appreciation of their shares and dividends that were among the highest declared by companies listed on the CSE. The company also did not make a great success of its spray drying milk powder project, something much needed by the country which has long been unable to make a dent in the import demand for this product. Nestomalt, Maggi, coconut milk powder etc. are Nestle products that have made their mark. Coconut milk powder has done very well in export markets. The company’s contribution to local dairy development is also not inconsiderable and its presence in the country has undoubtedly been for Sri Lanka’s benefit. It says it will maintain its presence here and development focus. But all things considered, remaining listed in Colombo and permitting nationals to have an ownership stake, though small, in the company would be considered desirable by many.

Around 2021, Nestle Lanka’s parent began to buy shares available on the market, a big block of slightly under 300,000 shares done at Rs. 1,200 a share. Some market participants, sensing or speculating of a delisting down the road began to focus on the share but acquiring quantity was difficult due to unavailability and the price per share being also high. So trading opportunities were limited.

Nestle has now announced that an Extraordinary General Meeting will be held in Colombo to consider the delisting resolution. It needs no rocket science to forecast that the company with over 6,000 minority shareholders, over 5,000 of them holding between one to one thousand shares, it will be possible to outvote the resolution on the ‘one shareholder, one vote’ principle. Given the experience of PDL and AIA, it is most likely that an effort will be made to force up the exit offer price. Other than for Nestle SA, the parent, no shareholder on the register holds more than one percent of the company. But institutions like the Sri Lanka Insurance Corporation, EPF and foreign and local funds are among the minority. Whether they would be satisfied with the exit offer or join the majority to up the ante remains to be seen.



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Editorial

Grave diplomatic issue

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Thursday 21st September, 2023

The recent killing of a prominent Sikh activist named Hardeep Singh Nijjar, in Canada, has triggered a diplomatic row between Ottawa and New Delhi. Canada lost no time in ordering an Indian diplomat out of the country, accusing India of having had a hand in the assassination. Denying Canada’s allegation, New Delhi reacted with a tit-for-tat diplomatic expulsion.

The so-called great powers have carried out numerous assassinations on foreign soil over the past several decades, with the US and Russia leading the pack. So, it is only natural that the spy outfits of powerful nations become the prime suspects when the people who are hostile to them happen to be murdered in other countries.

The diplomatic fallout of Nijjar’s assassination shows how concerned powerful nations such as Canada and India are about what they consider threats to their sovereignty. In a hard-hitting statement on the expulsion of its diplomat, the Indian External Affairs Ministry said Canada’s allegations sought to ‘shift focus from Khalistani terrorists and extremists, who have been provided with shelter in Canada and continue to threaten India’s sovereignty and territorial integrity’. Referring to Ottawa’s allegation against India, Canadian Foreign Minister Melanie Joly said, “If proven true, this would be a great violation of our sovereignty and of the most basic rule of how countries deal with each other.” (Emphasis added.)

Curiously, going by the Canadian Foreign Minister’s statement, the basis of Ottawa’s angry reaction is a mere allegation that has not been proved yet. Shouldn’t Canada have investigated the allegation against India thoroughly and made an informed conclusion instead of plunging head first into lighting the diplomatic blue touchpaper, as it were?

Whether India had a hand in the assassination at issue, one may not know, but what it has said about Canada stands scrutiny; Canada harbours foreign terrorists of all sorts, and, worse, it allows terror fronts to influence its policies simply because they are capable of delivering block votes and campaign funds to the Canadian political parties and politicians, who are no better than their Sri Lankan counterparts notorious for looking after the interests of lawbreakers in return for votes and campaign funds. This, Canada is doing while claiming to be promoting democracy and human rights globally. Can a country that allows terrorist groups and their fronts to use its soil and institutions to raise funds and drum up international support for violent conflicts in other countries expect the world to buy into its claim of being a champion of democracy?

Meanwhile, the US has called for an investigation into the assassination of the Sikh activist in Canada, according to foreign media reports, but one should not be so naïve as to think that Washington is driven by a genuine desire to get at the truth and ensure that justice is served. While making much-publicised calls for investigations for the consumption of the world, Washington is likely to intervene to reconcile Canada and India, for they are its strategic allies, and it does not want them to be at loggerheads.

The US is no respecter of human lives when it comes to safeguarding its interests. How it handled the assassination of Washington Post journalist Jamal Khashoggi is a case in point. The US intelligence agencies concluded that Saudi crown prince Mohammed bin Salman had approved the killing of Khashoggi inside the Saudi consulate in Istanbul, in 2018, but Washington did not target Salman with sanctions, financial or otherwise.

India has realised that it is really hurtful to have other countries harbouring terrorist groups who pose a threat to its sovereignty and territorial integrity. Ironically, it once did to Sri Lanka exactly what it has accused Canada of doing at present; it sheltered Sri Lankan terrorists.

If only the great powers heeded the Golden Rule, and did unto others as they would have others do unto them.

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Editorial

House of hypocrites

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Wednesday 20th September, 2023

Opposition politicians are making the most of Channel 4’s recent claim that the Easter Sunday attacks were part of a political conspiracy, and the Rajapaksa family and its loyalists in the state intelligence agencies were behind it. They are flogging the issue really hard in a bid to gain political mileage, which they are badly in need of, on the pretext of trying to have justice served for the victims of the carnage.

The past few days have seen the Opposition top guns going ballistic in Parliament, condemning the government and demanding an international investigation into the Easter Sunday terror attacks. Curiously, while calling for a fresh probe, they are demanding that criminal proceedings be instituted against certain individuals on the basis of the recommendations made by the Presidential Commission of Inquiry (PCoI), which investigated the Easter Sunday bombings. They find themselves in a contradiction. If they consider the PCoI findings credible enough to be the basis for criminal proceedings or any other form of punitive action against the persons they are hauling over the coals, why should they ask for a fresh probe, international or otherwise?

The Opposition yesterday renewed its call for legal action against Senior DIG Nilantha Jayawardena, who was the Head of the State Intelligence Service at the time of the Easter Sunday attacks. Speaking in Parliament, Chief Opposition Whip Lakshman Kiriella vehemently protested against a government decision to hold a meeting where Jayawardena was scheduled to brief the MPs on the ongoing investigations into the Easter Sunday attacks. He called for an explanation, condemning the government for having promoted Jayawardena.

The government should have implemented all PCoI recommendations, especially the one that former President Maithripala Sirisena and those who held key positions in the state intelligence agencies at the time of the 2019 terror attacks be prosecuted. But it found itself in a dilemma because Sirisena had closed ranks with the SLPP. It must be regretting its decision not to have him prosecuted because he has welcomed Channel 4’s allegations against the Rajapaksas and called for an investigation thereinto. He seems to consider them credible evidence, which will help prove his innocence! He is trying to wriggle out of trouble at the expense of the Rajapaksas!

The Opposition is right in condemning the government for having promoted the police officers whom the PCoI has asked the Attorney General to prosecute for their failure to prevent the Easter Sunday attacks. But it should not be selective in calling for action against those the PCoI has held accountable. Let the Opposition bigwigs be urged to read at least the pages 470 and 471 of the PCoI’s final report, wherein it is clearly stated that the entire Yahapalana government was accountable for the tragedy. The PCoI has said: “Since 2015 the Government did not give priority to national security … failed to properly appreciate the magnitude of the threat faced by the country due to IS and Islamic extremism and other forms of extremism. This was aggravated by the breakdown in trust between President Sirisena and Prime Minister Wickremesinghe …. The dysfunctional Government was a major contributory factor for the events that took place on 21st April 2019. The Government including President Sirisena and Prime Minister [Wickremesinghe] is accountable for the tragedy. (Emphasis added.)

Thus, as we argued in a previous comment, it is clear that all those who were in the Yahapalana Cabinet in 2019 are also accountable for the tragedy, and have no moral right to condemn others. They are currently in the UNP and the SJB.

The SJB MPs, who held Cabinet posts in the Yahapalana government ought to explain why they did not press for criminal action against the police and military officers concerned or an international investigation into the carnage, while they were in power. Equally culpable are those who backed the crumbling Yahapalana government, which neglected national security and did nothing to neutralise threats to the country; they include the JVP and TNA politicians.

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Editorial

Remembering JRJ

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Tuesday 19th September, 2023

It is customary to avoid speaking ill of the dead and instead focus on their positive qualities and accomplishments. That may be the reason why those who recently spoke or wrote about the late President J. R. Jayewardene (JRJ), on the occasion if his 117th birth anniversary, paid him glowing tributes and overlooked the dark side of his rule. Prominent among them were President Ranil Wickremesinghe and former Speaker Karu Jaysuriya. The former reportedly went to the extent of claiming that if Sri Lanka had sustained the socio-economic reforms initiated by his uncle, JRJ, it would have been a developed nation today.

We thought all governments since 1977 had followed JRJ’s economic policies. The UNP and the SLFP/the SLPP see eye to eye on economic liberalisation; they are the purveyors of crony capitalism in this country.

The JRJ presidency no doubt served as a catalytic force for economic, political and social change, but it was far from messianic or benevolent. In 1977, JRJ did the right thing, the wrong way on the economic front, paradoxical as it may sound. Dirigisme has become an anachronism in the modern world; it can exist only in a hermit kingdom like North Korea. The Sri Lankan economy had to be opened up in the late 1970s in keeping with emerging global politico-economic realities, but that task should have been carried out cautiously. Instead, JRJ flung the economy open.

JRJ was known for what may be called free market fundamentalism, which led to the ruination of some vital local industries and public enterprises. If only JRJ had cared to cross the river by feeling the stones, as the Chinese say, and heeded the oxymoronic adage, festina lente (‘make haste slowly’). Some economic commentators have traced the origin of Sri Lanka’s debt crisis to the JRJ rule, which led to a sharp increase in external borrowings.

On the political front, JRJ did not scruple to subjugate all democratic institutions to self-interest, and they have not recovered yet. The Constitution he introduced is replete with serious flaws, which have stood the unscrupulous in good stead. He was no respecter of the doctrine of the separation of powers and had the legislature under his thumb and did his damnedest to suppress the judiciary, albeit without much success. He once had the houses of the Supreme Court judges who refused to kowtow to him stoned, and openly shielded the police personnel who blatantly violated the fundamental rights of his political opponents at his behest. Political violence took a turn for the worse on his watch. He started the practice of giving presidential pardons to criminals. Ironically, all those who opposed his dictatorial actions and subsequently had themselves elevated to the executive presidency, which they promised to abolish, have been emulating him.

Curiously, Jayasuriya, who, as the Speaker, intrepidly defended the legislature vis-à-vis President Maithripala Sirisena’s deplorable efforts to wrest control of it, in 2018, and is championing democracy, has spoken highly of JRJ, who reduced Parliament to a mere appendage of the Executive and had barbaric violence unleashed against the Opposition, trade unions, etc.

The SLFP-led United Front government made a mockery of its commitment to democracy, in 1975, by abusing its two-thirds majority to extend the life of Parliament by two years. JRJ went a step ahead and replaced a general election with a heavily rigged referendum. His nephew has overtaken him posthumously! Today, it is the President who decides whether to hold elections!

Blunders that JRJ made were legion. He turned the country’s foreign policy on its head, sought to punch above his weight, and antagonised India in the process. His government also did precious little to stop the anti-Tamil pogrom in 1983; its goons were accused of organising and carrying out savage attacks on Tamil civilians. If JRJ had acted prudently and democratically, respecting the rule of law, perhaps, the country would not have had to fight a protracted terrorist war. He also blundered by falsely blaming the JVP for ethnic violence and proscribing it in 1983. He did so because the JVP had legally challenged the outcome of the referendum, which he used to retain his five-sixths majority in Parliament. The JVP went underground and took up arms again, plunging the country into a bloodbath in the late 1980s. Ironically, the JVP opted for a honeymoon with the UNP about three decades later and propped up the crumbling Yahapalana government; it has proved that politics is all about expediency and not principles.

The JRJ administration was not without some positives. The country is reaping the benefits of the development projects that the JRJ government launched despite criticism thereof in some quarters. It brought about an economic revival, which unfortunately the UNP itself failed to sustain due to corruption, mismanagement and cronyism.

When political leaders are commemorated, their policies and actions should be dispassionately appraised for the benefit of younger generations.

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