The Alchemist wrote:A interesting case where ethical and legal issues are intertwined. btw, COCR company secretary Jaycee = Julius & Creasy = CFLB Group
Just some points that come to mind.
1. When COCR bought out The Cooray Family interest in TFIL @ Rs 28, over 96 %, they established the price at Rs 28/ = for any future mandatory offer de-listing price. So simply and just because the price re-rated afterwards to the 40's should not make them liable to pay that incremental price.
No they don't have to offer higher than Rs 28 voluntarily if they want to buy remaining shares.
But just as that is an option to them , at the same time minority shareholders should not be forced to sell at the rate they want . If possible they can say Rs 20 even ( fortunately they can't do that)
2. Since we have no idea whether of future plans of COCR re TFIL i.e. leave it as a standalone company (subsidiary) or merge with it, we cannot expect them to for eg give TFIL shareholders COCR shares.
Yes we don't know the plans for sure. Could guess only3. Since there is a new mandatory free float law of 20 % and since post acquisition, it does not comply with it, and COCR may have no desire to increase Free-float of TIFL to seek compliance, then a mandatory de-listing maybe the eventual option.
That can happen 4. Prior to delisting, Since the New Companies Act seems to offer COCR a remedy to forcibly buy-over remaining shares at mandatory offer price ???
IF none of the remaining shareholders objects within 2 weeks (remedy is provided), they could do so however unethical it seems.
This is the question asked . Is the companies act proving them the power when no other company has done it including LAMB, SHAL, GOOD etc .
Note the comments I made regarding the contract,scheme and majority decision. If there are 50 minority share holders can 1 top holder over rule all of them and do their bidding? This sets a very very dangerous precedence if this ACT has a loop hole and is allowed. Note the Sec 246 applies for amalgamation. COCR has not issues any notice about amalgamation as per Sec 240 onwards. Then they directly quote 246 now.
Also when delisting time comes ( that is another matter) what are the rules that apply to delisting?
Thats when LAMB, SHAL,CDIC actions comes to play. We need to dig deeper.
Also if they are so sure they can take over minority shares by brute force ( certainly a terrible practice if allowed by authorties), why did they not disclose it during the mandatory offer or extended mandatory offer?
Why wait till now and do all this drama? 5. Perhaps the reason why COCR does not want to straightaway delist is because there maybe some clauses about a weighted average market prices etc in preceding 3 month prior (higher than Rs 28) but i doubt it since over 95 % was acquired at Rs 28. (or maybe even an independent valuation).
Yes 6. The remedy is prescribed in the company's Act to seek relief from court within a two week period. but who except for Mr. Vignarajah will incur costs and do it ?
Again question is whether COCR is abusing Sec 246 or found a loop hole
or made this forceful letter not following the proper steps?
CSE and SEC should play a role in this to clarify minority holders. yes am not sure how many there how can spend on court fees. . Minority holder should query SEC /CSE also.
Thats what SEC did when PCHH issue came.
7. Furthermore, besides the ethical issues, is it really worth it ? based on TIFL fundamentals (and if the majority Cooray Family saw fit to sell controlling stake at Rs 28), who can argue with that. Furthermore, if anyone feels TFIL is undervalued at Rs 28/-, they have the option of buying COCR, although i have not studied the valuations post acquisition.
This is separate matter.
a) From our perspective:
over valued or not at Rs 40 is an interesting question. Eps will be around Rs 3.5 this year, NAV about RS 15 now. Fundamentally I would value it now around Rs 32-35 giving an edge over GSF , Chilaw , MFL etc) looking at the consistant growth factor and earnings, dividends .
But yes there are more attractive shares in the market. But also the present COCR valuation, and people expecting COCR to go to Rs 60 will be a bigger question. GSF at Rs 30 will be question. Many examples.
But yes the play now is more speculative than fundamental and whether it valued much over Rs 35- 40 is arguable.
b) issue :
But that is not the matter here. The matter is can they use brute force to make every one sell at the price they want when a mandatory offer is over. What are minority share holder rights? This is legal point no one here can answer looking at the wording on Sec 246.
I see people now arguing whether it is overvalued at over Rs 28 or not. That is not the matter. Also yes I agree COCR don't have to pay Rs 40. NDB did not have to offer Rs 600 either. LAMB did not force share holders either.
So there is a legal , ethical matter entangled here I agree.
8. In Principle, their should be an option to remain as a shareholder of TFIL although it is mandatorily de-listed. (i know many people who are still shareholders for eg of Walker Tours even after JKH gave share swap for KHL and delisted Walker Tours).
Agreed
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