Sri Lanka’s Watawala Plantations ends management deal

Mar 18, 2014 (LBO) – Sri Lanka’s Watawala Plantations Plc said a management agreement with Estate Management Services (Pvt) Ltd, its key shareholder has been ended. In Sri Lanka’s commercial tea plantations date back from the British colonial era where third party ‘agency houses’ used to charge management fees on an arm’s length basis.

The firm said in a stock exchange filing that management fees will no longer paid the Estate Management Services and the company itself will manage it.

The management fees paid by plantations company is a legacy of a privatization process, where the fees were structured to provide cash flow to finance an indirect leveraged buyout of the firms by its managing agent.

The practice has been blamed by analysts for draining resources needed for capital expenditure.