A new consortium comprising foreign and local institutions has acquired 100% control of Melsta Regal Finance Ltd. for an estimated Rs. 2.5 billion.
The consortium comprises Fairfax Financial Holdings Ltd. of Canada, MAS Holdings, Hirdaramani and former JKH Deputy Chairman Ajit Gunewardene’s newly floated investment management arm Bluestone Capital Ltd.
For the acquisition, a Special Purpose Vehicle (SPV) by the name Bluestone 1 has been set up whose nominees will sit on the Melsta Regal Finance Board.
Melstacorp’s 100% investment in Melsta Regal Finance Ltd., undertaken about five years ago, has been stated at a cost of Rs. 1.36 billion. As per the parent’s Annual Report for the financial year 2017, Melsta Regal Finance’s Balance Sheet was worth Rs. 5.7 billion and is now estimated at Rs. 6 billion.
Melstacorp’s exit was attributed to the need to spend management time on core business whilst consolidating its equity investments in several listed large commercial banks such as HNB and distilleries.
For Fairfax, the 70% stake in Melsta Regal Finance reinforces its bullishness and growing presence in Sri Lanka’s financial services sector. It has a controlling interest in Fairfirst Insurance (the amalgamated entity of Union Assurance General and the former Asian Alliance General Insurance) and 15% stake in Nations Trust Bank (via. fully-owned subsidiary HWIC Asia Fund).
Both MAS and Hirdaramani also have passive stakes in several select listed companies. In Melsta Regal the duo will own 12% each.
The investment in Melsta Regal Finance is the first major transaction by Bluestone Capital of Ajit Gunewardene with many more under consideration.
Ajit, who is the founder and CEO of Bluestone Capital Ltd., is expected to be appointed to the Melsta Regal Finance Board as Chairman. Other nominees of Bluestone 1 will be JKH’s former Group Finance Director Ronnie Peiris and Bluestone Capital’s Shantanu Negpal.
Melsta Regal Finance, which has around 10 branches, is considered to have great potential with the infusion of a more focused management, long-term financial backing, technology and better governance.
Sources said that Sri Lanka’s non-banking financial sector though highly competitive has the potential for well managed and progressive companies especially in serving the SME sector which continues to have issues with access to finance.