John Keells shares swap rejected

Having studied the opinion of independent advisors the directors of Eden Hotel Lanka PLC, Confifi Hotel Holdings PLC and Riverina Hotels PLC have rejected the shares swap offered by John Keells Hotels PLC.

Directors of the Eden Hotels have rejected the recommendation of independent advisors CT Capital (Pvt) Ltd.

The Advisors had suggested that accepting the Keels Share Swap offer is an attractive proposition for the shareholders of Eden Hotel Lanka PLC as the swap ratio offered provides an equitable basis of exchange considering market prices and earnings based valuations.

They also highlighted the prospective long-term benefits from owning Keells Hotels PLC shares as against Eden Hotels PLC shares in the list of non-financial considerations. However, the directors of Eden Hotels Limited said that in the context of depressed market conditions that prevailed in the hotel industry in general, too much reliance on the earning based method of valuation of shares could be misleading.

Therefore, they said that a recommendation based on net assets would be more equitable in the interest of the shareholders.

They said that the swap ratio offered by Keells Hotels PLC for the Eden Hotel Lanka PLC shares falls short of what should be considered a fair offer under the circumstances.

Confifi Hotel Holdings PLC consulting independent advisor First Guardian Equities (Pvt) Ltd and the advisors suggested that the Keells Hotels PLC share swap cannot be considered as a fair exchange for the shares Confifi Hotel Holdings PLC shares considering the market price of shares, book net asset value per share and current replacement costs.

The Advisors, said that Sri Lankan hotel valuations should be based on assets value rather than on the earnings of the relevant property.

The Directors said that the Keells Hotels PLC share swap offer does not amount to a reasonable exchange to recommend to their shareholders.

Riverina Hotels PLC has also consulted independent advisor First Guardian Equities (Pvt) Ltd and the directors have come to the same conclusion. They said that hotel valuations should be based on assets value rather than on the earnings of the relevant property.

The share swap offers had been made according to CSE Rule 13 (2) of the company Takeover and Mergers Code 1995 as amended in 2003.