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Two foreign banks to acquire AAI stake

21 Dec 2012 - {{hitsCtrl.values.hits}}

Germany’s DEG and Dutch state-owned development bank FMO will be purchasing 38 percent stake in Asian Alliance Insurance PLC (AAI), of which over 95 percent is controlled by Sri Lanka’s diversified Softlogic group.

The Rs.1.8 billion transaction at a price of Rs.128 per share will take place via the Colombo Stock Exchange and is expected to be completed by early January 2013 with both parties holding an equal 19 percent stake.

“This partnership will be of tremendous benefit to all stakeholders, particularly since it will enable the company to access international expertise and strategy. We have carefully evaluated a number of potential investors for AAI and we are extremely pleased to have DEG and FMO on board with us,” Softlogic Group and AAI Chairman, Ashok Pathirage said.

Subsequent to the completion of the transaction, both FMO and DEG will also nominate a director to the AAI director board. However, both the transaction and appointment of directors will only take place subsequent to regulatory approval from the Insurance Board of Sri Lanka.

Commenting on the rationale behind DEG’s investment into AAI, Investment Manager, Equity, DEG, Thomas Kronsbein said, “For DEG, we have had a long partnership with Sri Lanka already and we are optimistic about the growth potential of the insurance industry given the low penetration of insurance, coupled with increasing per capita income.” The partnership is also part of FMO’s initiatives to improve access to finance in Sri Lanka.

“The insurance sector is still a fairly new area for FMO and at present we are only operating through 3-4 other insurance companies worldwide. However FMO recently took the decision to enter into the insurance sector with a view to improving access to finance.”

“We already operate in finance, leasing and micro finance sectors. However, insurance too is a type of financial product which the general public requires and we believe this partnership will create strong opportunities in this regard,” Senior Investment Officer, Private Equity, Arno de Vette said.

FMO made headlines early this month with the approval of a US$ 10 million loan to Softlogic Finance PLC.

The loan is to be disbursed in two tranches of US$ 6 million whilst the US$ 4 million unsecured convertible subordinated loan will be disbursed once approval of the Colombo Stock Exchange is obtained.

AAI is a composite insurer engaged in both life and general insurance and is a company under the Softlogic Group.

Headquartered in Cologne, Germany, DEG is a subsidiary of KFW, one of the largest European development finance institutions for long-term project and company financing whilst FMO, based out of The Hague in Netherlands, is a development bank focused on financing companies, projects and financial institutions from developing and emerging markets.

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Two foreign banks to acquire AAI stake

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