Sri Lanka’s Watawala Plantations to separate tea business

June 30, 2017 (LBO) – Sri Lanka’s Watawala Plantations is planning to set up a separate company relating to the tea business segment of the company by segregating its operational assets and liabilities. The firm said in a stock exchange filing that the said assets and liabilities will be vested in the new limited company which would subsequently be listed, together with the continued employment of all employees who are involved in the tea business segment. According to them, the new company will have a mirrored shareholding to Watawala Plantations and that the segregation will be effected in terms of an “arrangement" to be approved by court under Sec. 257 of the Companies Act No.7 of 2007. The Board of Directors of the company at a meeting held on 29 June 2017 has resolved this decision. Watawala Plantations is a diversified plantation company producing palm oil, tea and other export crops grown, harvested and processed in 17 estates and 14 manufacturing facilities. The company provides employment for over 9,500 people and engages with over 55,000 residents on their estates. The company has 13 tea estates with 4,465 hectares cultivated and producing 7,422 MT of tea in 13 factories. Last year, the revenue growth of the company was a modest 3 percent as drought impacted tea production resulting in a volume reduction of 21 percent over the previous year. Palm oil production supported revenue growth as production volumes improved by 18 percent during the year, offsetting the negative impact of tea. Statement issued by Watawala Plantations is reproduced below. Watawala Plantations PLC, one of Sri Lanka’s largest plantation companies announced that it intends to separate it’s tea business from other businesses of the company into two separate independent listed companies. The separation will be made under an arrangement which will be subject to court approval under the Companies Act. Watawala Plantations stated that the separation of the business activities will enable the two companies to focus on their respective areas of activity and achieve strategic specialization. Moreover, it will further enable their respective boards to adopt financial and operational policies which are appropriate for their respective strategic objectives. Watawala Plantations PLC further stated that following the arrangement the existing shareholders of Watawala Plantations PLC will be entitled to identical shareholdings in the new company. Following the segregation, the employees of the 2 companies will continue to enjoy their existing benefits and privileges under the recent terms of employment and there will be no negative impact on their existing entitlements. The Board of Watawala Plantations PLC further stated that the proposed segregation will, in addition to creating greater opportunities for specialization also enable the companies to attract investments and know-how from investors with an interest in respective areas of business activities. (Updated)