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Sri Lanka’s Laugfs Gas revamp to lure strategic partners, foreign funds

ECONOMYNEXT –A planned restructuring of Sri Lanka’s Laugfs Gas group, bringing core liquid petroleum gas assets under one entity and spinning off other units into separate companies will help lure investments from potential strategic partners and foreign funds.

The revamp, effective from 31 March 2018, will see shareholders get three additional shares in subsidiaries to be listed, Laugfs Power, Laugfs Leisure and Laugfs Eco Sri, for every one in Laugfs Gas PLC, its chairman W K H Wegapitiya said.

“In the next six months big changes are coming,” he told a news conference. “A lot of new things will happen after the restructuring.”

A company statement said the strategic restructuring process is likely to create an avenue for greater inflow of foreign direct investment for each business segment by encouraging regional investors that look to invest in individual and focused business ventures as opposed to diversified businesses, especially unrelated diversification.

“The management believes that the LPG business in particular will benefit from the restructuring process by attracting foreign strategic investors with specific knowledge in the energy segment.”

There are six businesses within the group, three in the core LPG and three in non-core sectors.

Under the restructuring of its core businesses, Laugfs Gas will consolidate its LPG downstream activities in Sri Lanka and Bangladesh, LPG sourcing, LPG maritime logistics and the terminal operations under in entity, Wegapitiya said.

The three non-core businesses, Laugfs Power Ltd., which has a big solar power pkant and smaller hydro power plants, Laugfs Leisure which has two hotels, in Chilaw and Passikudah, and Laugfs Eco Sri, which does vehicle emission testing will be individually listed on the Colombo Stock Exchange (CSE) subject to regulatory approvals.

The revamp is “going to be beneficial to shareholders and prospective strategic investors,” Wegapitiya said.

“In the last few years there were many prospective partners who looked at us but we had legacy issues which discouraged them from associating with us.”

These were the unrelated non-core businesses.

“When energy firms approached us, they felt they had no interest about leisure, power, and emissions testing,” Wegapitiya said.

Some strategic partners approached the management for talks on leisure but were not willing to come when they saw non-related businesses in the group.

“So we wanted to change our structure to make it more attractive to others. The restructuring will maximise values. The real value is not displayed since other value eroding businesses are within the group. Investors prefer to go into specific business streams,” Wegapitiya said.

“A lot of institutional investors look for clarity of purpose – a wide array of businesses deters a lot of investors,” said Deshan Pushparajah, managing director, global markets and investment banking, at Capital Alliance Partners Limited, the investment bank which assisted the restructuring.
(COLOMBO, March 07, 2018)


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