JKH buyback fully subscribed, Rs11bn worth of shares to be repurchased at 160

Krishan Balendra during a Bloomberg Television interview in Hong Kong. Photographer: Lam Yik Fei/Bloomberg via Getty Images

January 16, 2019 (LBO) – Shareholders have tendered approximately one hundred million shares of John Keells Holdings (JKH) into the company’s latest buyback offer.

The company will purchase approximately seventy million of the shares tendered at a price of Rs160/share, constituting 5% of the total outstanding shares of the company. JKH will expend Rs11 billion in order to complete the repurchase.

The buyback offer was made amid a flagging share price which had dropped to a multiyear low of Rs126/share, a price significantly below the current book value of over Rs150/share.

After the buyback issue was announced, the stock traded as high as Rs160, before dropping down to today’s price of Rs152/share after the tender offer was closed.

The stock traded a healthy 5 million shares in today’s trading session. Today’s trading day saw net foreign selling in the market of Rs600mn, most of which was likely in shares of JKH.

Local buyers of JKH have been the Captian family and Harry Jayawardena who together likely own well over 25% of the company. There has been repeated speculation that JKH has become a takeover target with market participants awaiting the company’s corporate earnings release to see how much the above mentioned parties have increased their stakes.

JKH as of January 1st has effected the most significant management change in decades with Krishan Balendra (45) taking over as Chairman/CEO and Gihan Cooray (42) as Deputy Chairman/CFO. The company is the largest corporate in Sri Lanka and by far the most important company listed on the Colombo Stock Exchange (CSE).

The market capitalisation of JKH sits at close to US$1.2bn, so In order to acquire a controlling 50.1% stake in JKH, a shareholder would have to own a stake worth close to US$600mn. It is unclear if any of Sri Lanka’s leading investors have the financial firepower to make a serious takeover play.