LB Finance acquires 65% of Multi Finance for Rs.400mn

Billionaire businessman Dhammika Perera-controlled LB Finance this week acquired the controlling stake of Multi Finance from Fairway Holdings (Pvt) Limited for Rs.400 million with plans to infuse fresh capital to the company to meet minimum core 
capital requirements.

On Wednesday, LB Finance acquired 28.78 million ordinary voting shares of Multi Finance paying Rs.9.70 per a share and a further 12.32 million ordinary voting shares for Rs.9.80 per share from Fairway Holdings, accounting for 64.62 percent stake in Multi Finance.

Following the approval of the Monetary Board of the Central Bank under its Master plan for Consolidation of Non-Bank Financial Institutions, Fairway Holdings agreed to sell its controlling stake in Multi Finance to LB Finance on November 17, 2021 for a consideration of Rs.9.72 per share.

Following the acquisition of Multi Finance, L B Finance is now expected to infuse fresh capital into Multi Finance to meet the minimum core capital requirement of the Central Bank. Also, LB Finance is expected to merge with LB Finance being the surviving company. 

Despite the investments made by Fairway Group, Multi Finance was unable to fulfill its commitments on core capital, which led to the restrictions of its activities by the Central Bank.
As of December 31, 2021 Multi Finance’s accumulated losses were at Rs.462.03 million. The last time it recorded a profit was in FY2014/2015.

The company incurred losses for six consecutive years as a result of core capital issues and resultant CB 
imposed restrictions.

However, the company was able to narrow its losses to Rs.8.6 million in the quarter ended December 31, 2021 from Rs.14.66 million a year ago.

Based on core capital, Multi Finance has been categorised as a ‘Category C’ company by the Central Bank while LB Finance has been categorised as a ‘Category A’ company.
As of December 31, 2021, Entrust Holdings Ltd was the second largest shareholder of Multi Finance with 
29.93 stake.

Dhammika Perera holds over 67 percent ownership stake in LB Finance through Vallibel One PLC and Royal Ceramics Lanka as well as direct holdings.