03 Oct 2016
After a spate of aggressive expansion in ASEAN, SET-listed digital finance company Group Lease Public Company Limited (GL) is now extending its business footprint to outside the region by acquiring a substantial stake in a leading Sri Lankan finance institution registered by the Sri Lanka Central Bank which is highly profitable and listed on the Colombo stock exchange.
According to GL Chairman and CEO Mitsuji Konoshita, GL’s latest decision to buy 29.99% of Commercial Credit & Finance Plc (CCF) will further enhance the strategic partnership between the two groups. “We will combine GL’s efficient digital finance platform with CCF’s successful microfinance model to grow our businesses in all markets where we are and will be present. This acquisition will bring estimated consolidated profits of about US$ 7 million annually starting immediately in Q4 this year,” Mr. Konoshita said.
Mr. Konoshita also noted that GL, through its subsidiary in Singapore GL Holdings (GLH), will potentially have the rights to acquire the remaining 70% in CCF should the CCF shareholders decide to sell in the future under a special clause on the first rights of refusal stipulated in the shareholders agreement.
The acquisition valued at US$ 70 million marks GL’s first major expansion outside of the ASEAN region. From its home base in Thailand, GL has expanded successfully into Cambodia, Laos Indonesia and, more recently, Myanmar.
In the same exercise as the CCF acquisition, GLH is also acquiring full ownership of CCF’s microfinance subsidiary in Myanmar – BG Microfinance Myanmar Co Ltd (BGMM). GLH in early September bought 71.9% shares in BGMM and is now buying up the remaining 28.1% from CCF to gain complete control.
At a shares sale/purchase agreement signing ceremony in Bangkok to effect both transactions on October 3, the GL Chairman Mr. Konoshita said the CCF acquisition in particular will have a significant impact on the group’s profitability right away since earnings from CCF will be consolidated into GL’s accounts starting in the current Q4.
CCF has an assets size of about US$ 500 million compared to GL’s roughly US$ 450 million although the latter’s market capitalization is substantially larger than that of CCF owing to the solid strength and popularity of the Thai stock market compared to the less developed Sri Lanka stock exchange. CCF has projected a net profit of US$ 22 million this year.
Mr. Konoshita noted that GL will have some representation on the CCF Board but will allow the current management a free hand in continuing to run the company because the management is very effective. “This is a mature company with perfect management. We may support by introducing supplementary businesses such as e-payment, e-commerce or insurance,” he said.
The shares sale/purchase agreement signed on October 3 takes immediate effect conditional on the approval of the relevant authorities in both countries, endorsement by the Extraordinary Shareholders Meeting (EGM) and also the Independent Financial Advisors (IFA) report.
Mr. Konoshita stated that the GL-CCF relationship is a win-win strategic partnership giving synergies to both sides. “Our digital finance platform can nicely enhance their expertise and knowhow in microfinance; while their need to access to capital can easily be met by our capability to raise funds internationally,” he added.
Mr. Konoshita stressed that the new partnership with CCF will produce highly positive impact on GL’s revenue and earnings in the future because the “group finance” model which has been successfully developed in the microfinance heartlands of Sri Lanka and Bangladesh will help to vastly increase GL’s traditional markets of consumer finance and hire-purchase in the region and elsewhere.