Apollo decides to exit operations in Sri Lanka

India`s Apollo hospitals on Thursday decided to exit its operations in Sri Lanka after failing to stave off a hostile takeover bid by a local business tycoon.

Apollo sold 52 million shares in Lanka Hospitals corporation, the owners of Apollo Sri Lanka, to the Sri Lanka Insurance Corporation which is owned by Harry Jayawardena.

Apollo accepted a mandatory offer made by Jayawardena to buy each share at 28 rupees after he acquired more than one third of the company recently.

Today`s deal was worth 1,456 million rupees, officials at the stock exchange said.

Two other minority shareholders of Apollo, Sino-Lanka which had three per cent and R Navaratnam, a key promoter of Apollo in Sri Lanka, who had five per cent also sold out today to the insurance company.

The Indian parent was engaged in a bitter row recently to retain ownership and had Indian High Commissioner Nirupama Rao intervene on behalf of the company to secure their holding.

The Board of Investments (BoI), the main foreign investment regulator in the island sided with Lanka Hospitals Ltd saying they will lose tax breaks if the owning structure of the 350-bed hospital changed.

However, the local buyers won assurances through the stock exchange that the concessions were to the company and not to private individuals. Even yesterday, the government had sought to defend the interests of the Apollo owners.

The BoI made a sudden announcement last month, after Indian High Commissioner Rao urged Investment Promotions Minister Rohitha Bogollagama to prevent Jayawardene taking over Apollo, according to local media reports.

The BoI statement itself was unclear if the incentives were given to Pratap Reddy and his family or to Lanka hospitals. The details itself were not clearly disclosed in the prospectus when Lanka hospitals raised money by offering shares to the public.

For the three months to June, Apollo extended its losses to 14 million rupees over 1 million rupees reported during the same period 2005.

The hospital`s revenue gained 6-per cent to 460 million rupees during the period under review, and said an 18 per cent rise in staff costs curbed operational profits to 33 million rupees.

Sri Lanka Insurance Corp (SLIC) with 36.1 percent was the largest shareholder, followed by the Apollo group 32 percent. The other key shareholders are the Bank of Ceylon, Sino Lanka and R Navaratne who each hold between 3-13 percent.

SLIC made an offer to buyout the remaining 63.9 percent shares at 28.00 rupees, to keep in line with Sri Lanka`s securities law, which mandates a shareholder owning 30 percent or more to make a mandatory offer to the other share holders.

Harry Jayawardene`s growing empire covers liquor, hotels, telecoms, financial services, plantations, shipping, healthcare, banking and food and beverages.

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