George Steuart to acquire HVA Foods

• Controlling shareholder agrees to sell 51% stake for Rs.119mn, paying Rs.3.50 a share
• GS&Co to announce mandatory offer to acquire remaining shares
• GS&Co says acquisition is a strategic move to expand its portfolio and commitment to tea and FMCG sectors

George Steuart & Company Limited (GS&Co) yesterday announced a voluntary offer to acquire all the issued shares of HVA Foods PLC, with the latter’s majority shareholder agreeing to sell the controlling shareholding of the company.

Accordingly, GS&Co will acquire 33.9 million HVA Foods shares, which constitute to 51.1 percent of the issued shares of the company from the majority shareholder, HVA Lanka Exports Private Limited, controlled by businessman Rohan Fernando, who is also the current Chairman of Sri Lanka Telecom PLC.

The shares will be acquired at Rs.3.50 each, which amounts to a total value of Rs.119 million. 

HVA Lanka Exports owns 40.5 million shares, out of the 66.4 million issued shares of the company, which constitute to 61.1 percent.  GS&Co is expected to announce a mandatory offer under the Securities and Exchange Commission’s Takeovers and Mergers Code to acquire the remaining issued shares.

“The ordinary shares to be acquired under the offer shall be acquired free from all liens, claims, charges, third party rights and other encumbrances and together with all rights now or hereafter attached thereto, including profits, dividends and distributions (if any) declared and made or paid thereon,” GS&Co said in a filing. 

HVA Foods, which is a dynamic player in the global tea market with its flagship brand Heladiv, is known for redefining tea as a beverage, transcending orthodox tea preparations by innovating contemporary tea-based products. As at September 30, 2020, HVA Foods had interest-bearing loans and borrowing to the tune of Rs.404 million and an accumulated loss of Rs.640 million. HVA Foods share closed at Rs.6.50 yesterday, 10 cents or 1.52 percent down from the previous close. The voluntary offer announcement was made after the close of trading hours.

The company’s book value as at end-September was Rs.1.03 per share. For the FY19/20, HVA Foods recorded a net loss of Rs.135.5 million on a revenue of Rs.825.6 million, down from Rs.1.09 billion in the previous financial year.

The total assets of the group, as at March 31, 2020, stood Rs.905.5 million.  Established in 1835, GS&Co is the oldest mercantile establishment in Sri Lanka and has diverse business holdings across a plethora of industries, including health, travel, leisure, money broking, insurance and has 13 subsidiary companies.   “The transaction, structured under the guidance of NDB Investment Bank, is a strategic move by the George Steuart group to further expand its portfolio and commitment to the tea and FMCG sectors, both locally and internationally,” a press release by GS&Co said.

“This envisaged addition will not only expand its global reach and export volumes but also its internationally renowned brand portfolio to include brands such as Heladiv, Infini-t and Tea Plus. GS&Co will thus open its doors to innovative beverage segments such as iced tea, tea cordials, moringa teas and king coconut/aloe vera-based drinks.  The Heladiv Tea Club will also no doubt complement the group’s well established F&B sector. Under its wings, GS&Co hopes to unlock group synergies to reduce redundancies and cost structures whilst capitalising on economies of scale in its tea and FMCG sectors,” it added.

Commenting on the new acquisition GS&Co Chairman Dilith Jayaweera said, “We are delighted that another globally-recognised local brand will become part of the George Steuart family, allowing us to push the boundaries of success across the tea and FMCG industries.  This move also represents our commitment to driving the local manufacturing industry, adopting newer, diverse value-added products that meet the ever-changing requirements of both local and global consumers.” “Since 1990, we have taken pride in challenging convention and making the traditional beverage of tea a more versatile product. Being the first iced tea brand in the country, we led the march in inspiring traditional tea exporting concerns to become relevant in the new age,” HVA Foods Founder/Chairman Rohan Fernando said.

“We emphasised the importance of research and development by setting up a dedicated R&D laboratory, which was the first of its kind in the industry. Today, we are confident that this strategic acquisition by GS&Co will propel Heladiv into the new global vistas that the brand deserves,” he added.