ADB to Invest 8.5 % of JKH Stake for US$ 80 M
Sri Lanka’s premier Blue-chip Company, John Keells Holdings PLC (JKH) yesterday announced that they were planning to raise USD 80 million from the Asian Development Bank (ADB), Via Private Placement.
In exchange, the Company has agreed to issue up to a maximum of 122.5 million new shares, in two phases.
Under Phase 1, a share issued will be priced at Rs 154.50, with the number of shares equivalent to USD 50 million being issued at subscription. ADB will also be issued options to subscribe for additional new ordinary shares of the Company.
Under Phase 2, post-completion of 9 months from the date of subscription, ADB can exercise its options at a minimum of Rs 165.00 per share and maximum of Rs 200.00 per share, within a 3 month window.
The number of Option Shares will be capped at a total investment not exceeding USD 30 million which would be converted to Sri Lankan rupees at the prevailing exchange rate at the time the options are exercised.
Collectively, both the initial placement and option shares could result in a maximum dilution of 8.5% shares outstanding, it stated.
The Company notes that the funding will be utilised mainly towards expanding the Keells Supermarket business.
“The proceeds from this transaction will be utilised for the purpose of corporate level balance sheet support towards funding its investments in the ‘Keells’ Supermarket business which includes the long-term outlet expansion plan including construction and equipment, start-up expenses and the construction and equipping of the supporting logistics infrastructure to facilitate this.
Further, the Proposed Private Placement will afford the Group the flexibility and agility to fund its investments in an optimal manner, whilst providing additional support to the Group’s liquidity position, particularly in terms of providing further leeway to manage the foreign currency commitments of the Group’s landmark projects such as the ‘Cinnamon Life’ integrated resort and the West Container Terminal in the Port of Colombo.
In addition, given ADB’s investment mandate pursuant to which private sector projects must have clear development impacts and positive externalities, particularly in Environmental, Social and Governance (ESG) aspects, JKH will leverage on ADB’s technical expertise and advisory to enhance and further strengthen the Group’s existing ESG processes and frameworks to reach best in class benchmarks. The Group believes that partnering with an internationally reputed financial institution such as the ADB, particularly at this juncture, is a vote of confidence for JKH and the country”, JKH stated.
Meanwhile, commenting on this deal the research arm of the Asia Securities stated, “We view the private placement extremely positively for JKH with ADB purchasing the shares at Rs 154.50. In our view, the share is likely to rerate over the next 6 months with market factoring in positive development”.