LAUGFS has expressed interest in buying the 49 percent stake of Shell from the Sri Lanka government if the ongoing Royal Dutch Shell (RDS) deal with Sri Lanka government is signed and a 49 percent stake is then divested by the government.
“If a 49 percent stake held by the government is sold to the public through a listing, as proposed, we are very interested in grabbing the full 49 percent stake,” Chairman Laugfs Gas Holding, W K H Wegapitiya told The Bottom Line.
According to him, LAUGFS would not have a problem in raising the necessary finance to acquire the stake of Shell, since at that time it might even have the funding raised by a forthcoming Initial Public Offering (IPO) which commences early next month.
“As far as funding is concerned, we could also use funds raised through the forthcoming IPO as well if necessary,” he suggested.
LAUGFS seeks to raise Rs. 2.5 billion through the IPO which is set to officially open on November 04, 2010. However, according to calculations, if US $63 million (Rs7.056 bn, assuming 1 USD = Rs112) is required by the Government of Sri Lanka to buy a 51 percent stake, LAUGFS might need an approximate Rs6.8 bn for a 49 percent stake of Shell.
Media reports that came in earlier in the week however suggested that part of the funds raised through the LAUGFS IPO would be used to retire expensive debt, finance further expansion and to diversify into the leisure sector.
“Out of the total money raised, we are hoping to use Rs. 1 bn for our expansion drive and use another Rs. 800 m to set off our borrowings from the banks,” one media report quoting the LAUGFS chairman had stated.
The government, which already owns a 49 percent in Shell and is presently finalising a deal with RDS to buy the balance 51 percent stake said that it is looking to divest a 49 percent stake after buying out the controlling stake.
According to the media minister and government spokesman Keheliya Rambukwella, the government is looking to divest the 49 percent minority stake by way of listing in the stock exchange to pave way for an effective public public-private partnership.
Addressing a cabinet briefing on last Thursday, he said the government had offered US 63 million dollars to acquire the remaining 51 percent stake of SGLL with talks between the two parties now over and the deal currently being finalised.
According to sources, state institutions such as Sri Lanka Insurance Corporation, state banks and Employees Trust Fund may help finance the purchase.
RDS, which originally acquired the firm as part of a privatisation drive undertaken by the Sri Lanka government would be exiting its Asian oil operations if the controlling stake in the Sri Lankan operation is divested.
SGLL is engaged in importing, storing, filling, marketing and selling liquefied petroleum gas in Sri Lanka. Presently, it is a joint venture between RDS and Government of Sri Lanka with 51% and 49% shareholding, respectively. (AR)
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