In early May 2023, Nestl\u00e9 Lanka announced that it would be delisting from the Colombo Stock Exchange (CSE), subject to shareholder and regulatory approvals.<\/p>\n\n\n\n
The company\u2019s Board Of Directors (BOD) proposed to delist the ordinary voting shares from the Official List of the CSE and entered into an agreement with the controlling shareholder and parent company, Nestl\u00e9 S.A. (effective holding of 91.95% in the company) to offer an exit price of Rs.1,500.0 per share at a 34% premium to the closing price of Rs. 1,120.25 last traded pre-announcement, for the remaining 6,054 shareholders holding 8.05% stake in the company.<\/p>\n\n\n\n
As per the Delisting Rules, the BOD requires approval of the shareholders by way of a special resolution
of 75% of the shareholders present at the meeting. Nestl\u00e9 announced that an AGM will be held on the
30th of June 2023 to consider the delisting resolution.<\/p>\n\n\n\n
“It may be possible to outvote Nestl\u00e9\u2019s delisting resolution based on the \u2018one shareholder, one vote\u2019 principle at the AGM, and considering the past situations involving Property Development PLC (PDL) & AIA, it is highly probable that there will be an attempt to increase the exit offer price,” First Capital Research (FCR) said in a report.<\/p>\n\n\n\n
With the exception of its parent Nestl\u00e9 S.A., no individual shareholder listed on the register possesses more than a 1% stake in Nestl\u00e9 Lanka. However, institutions such as the Sri Lanka Insurance Corporation, EPF, as well as foreign and local funds, form part of the minority shareholders.<\/p>\n\n\n\n
In recent times, PGP Glass Ceylon PLC which attempted to delist had eventually failed as the proposal was refused by minority shareholders. Property Development PLC (PDL) and AIA delisting proposals were also rejected by minority shareholders based on a \u2018one shareholder, one vote\u2019 principle.<\/p>\n\n\n\n
PDL\u2019s delisting decision took over 5 years after the proposal was first announced. It delisted by paying LKR 183.0 per share, which is more than 40% of what was offered in 2018. However, the company’s shares did not witness a comparable increase in value as the Nestl\u00e9 share, nor did it offer substantial dividend payments like Nestl\u00e9. In the end, the company, rather than its primary shareholder, Bank of Ceylon, acquired the remaining shares from the minority shareholders. In AIA\u2019s case, a price of Rs.2,500.0 per share was paid against an original exit offer price of Rs.1,000.0.<\/p>\n\n\n\n
Nestl\u00e9 Lanka believes that the Exit Offer Price provides a fair value as its average daily turnover of Rs.2.2 million accounts for only 0.0037% of its total market cap of Rs.60.0 billion. Hence, it strongly believes that accepting the offer at its \u201cattractive and fair premium\u201d price would be in the best interest of its shareholders, as holding shares in an unquoted company with illiquid shares offers no advantageous prospects.
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