DCSL restructuring stage two publicised
Distilleries Company PLC (DCSL) has publicised stage two of its restructuring initiative after the success of the first phase.
A DCSL Board Resolution advised shareholders that a sub-division of 1 into 10 would raise the current 300 million to 3 billion.
Also, 1.6 billion shares would be issued to Melstacorp at LKR 12.50 each which totalled an LKR 20 billion private placement.
The private placement will be executed after the completion of the share sub division.
The last Board Resolution advised reducing LKR 17.3 billion of DCSL’s stated capital.
Subsequent to measures mooted which are subject to shareholder and regulatory approval, DCSLs’ number of shares in issue will be 4.6 billion. The current stated capital of the company which is LKR 300 million would increase to LKR 20.3 billion post private placement and reduced to LKR 3 billion at the conclusion of the reduction of stated capital.¹
The proceeds of the private placement will be used to reduce the liabilities of the Company and improve the negative net asset position of Distilleries. This was on account of the transfer of LKR 75 billion worth of assets from DCSL to Melstacorp through a share swap during the first phase.²
The Company has a negative retained earnings of LKR 29.2 billion as at 30 June 2017, which adversely affects its ability to pay a dividend to shareholders. In terms of the Companies Act the Solvency Test requirements have to be satisfied prior to any dividend distribution in the future. In view of this, the Directors have proposed a reduction of stated capital to wipe out the negative retained earnings of the Company.³
Accordingly, the stated capital will be reduced from LKR. 20.3 billion represented by 4.6 billion shares to LKR 3 billion comprising 4.6 billion shares.⁴
During the FY 17 DCSL PLC ventured into a restructure arrangement under Part ‘X’ of the Companies Act No. 07 of 2007, seeking approval for a share swap that would result in the shareholders of DCSL becoming shareholders of Melstacorp. Consequent to the necessary approval from the Court and with the overwhelming approval of the shareholders the 180 degree share swap was completed during the fourth quarter of 2016. DCSL PLC together with other subsidiaries are now subsidiaries of Melstacorp PLC. As of now DCSL PLC is a standalone liquor company without any substantial holdings in companies in other sectors and all former subsidiaries of DCSL Group now owned and managed by Melstacorp PLC.⁵
The restructure was to bring multitude of benefits to the shareholders including unlocking of Group’s value due to DCSL PLC acquiring beverage sector multiples and through the establishment of an umbrella brand that can be extended to subsidiaries.
The final phase of restructuring will restore the public float of DCSL, making it compliant with the public float requirements as per the Colombo Stock Exchange.⁶
OSL TAKE:
The growth shown in one of the pioneer distilleries in the country could pave the way for others also to follow suit in streamlining their business.
http://www.ft.lk/front-page/Distilleries-announce-second-phase-of-restructuring/44-640305
| Article Code : | VBS/AT/27092017/Z_4 |