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Lankan Govt promises to stop take over of Apollo

But the affected parties are keeping their fingers crossed, given the Lankan background of going back on promises, reports PK Balachandran.

india Updated: Aug 07, 2006 17:52 IST

The Sri Lankan government has promised that it will restrain a local corporate raider, who is on the verge of taking over the state of the art Apollo Hospital in Colombo.

But the affected parties are keeping their fingers crossed, given the Sri Lankan background of going back on promises. 

After the Indian High Commission impressed upon the Sri Lankan government that the hostile take over bid by the local business magnate, Harry Jayawardena, would affect investor confidence "very negatively" the Sri Lankan Minister for Investment Promotion, Rohitha Bogollagama, announced that he would prevent the merger from taking place.

"I have assured the Indian High Commissioner that bullying tactics will not be permitted and the wellbeing of investors would be safeguarded," Bogollagama told The Island.

Jayawardena's companies, including the Sri Lanka Insurance Corporation (SLIC), last month upped their stake in the Lanka Hospitals Corporation Ltd (ie: Apollo) from 20 per cent to 38 per cent, with a SLRs 700 million investment, overtaking Apollo Hospitals of India, which owned 36 per cent.

The Sri Lankan raider was due to make a mandatory offer of SLRs 28 per Apollo share to other minority shareholders, as per the Takeovers and Mergers Code.

But according to informed sources, the other investors in the company were subjected to strong arm tactics by Jayawardena.

The Indian High Commission pointed out to Minister Bogollagama that institutions like the insurance corporation should play a steadying and balancing role in the companies in which they had invested, and not play a part in hostile takeovers.

It pointed how in India, institutions like the Life Insurance Corporation played a moderating role.

If such takeovers became the order of the day, international investors would hesitate to invest in Sri Lanka, the mission said.

It was explained to the Minister that institutions like Apollo and the Indian Oil Corporation had set new standards and raised the bar in hospital services and oil retailing in Sri Lanka.

Crippling them would only harm Sri Lanka's economic development.

Apollo hospital was established at the request of the former President Chandrika Kumaratunga, and had the full backing of the then Leader of the Opposition Ranil Wickremesinghe.

Minister Bogollagama subsequently announced that President Mahinda Rajapaksa had assured the Apollo management that the state-owned Bank of Ceylon's Property Development Ltd, which owned 13.6 per cent of the stake in Apollo, would not accept Jayawardena's offer.

However, given the Sri Lankan government's past record in keeping     promises and a tendency to change conditions midstream, the concerned parties were waiting gingerly for developments.

Earlier, it was expected that Apollo India would pull out, but it was made clear by its financial director Suneetha Reddy that it would stay put in Sri Lanka, as it was a good investment destination.

Not been easy going for Apollo

Even though the 500-bed Apollo has set new standards in health care, it has not been a very popular hospital, partly because of its high rates.

"Wealthy Sri Lankans who were going to Singapore for treatment, continue to do so. And the middle class Sri Lankans finds Apollo too expensive," explained an Indian doctor at the hospital.

The doctors and other technical staff also face visa problems.

The Sri Lanka Medical Councils' hostility to the Indian doctors and staff working in the hospital has reportedly resulted in just about third of the visa seekers getting it.

Doctors going away in the middle of treatment, has created problems for patients.

Set up at a cost of SLRs 2 billion, the hospital is struggling to keep afloat, according to Harry Jayawardena.

The Sunday Leader reported that the hospital made a loss of SLRs 55.9 million up to March 31, 2005 and made a profit of SLRs 3.9 million in the financial year ending March 31, 2006.

The Daily Mirror Financial Times quoted Jayawardena as saying that his attempt could not be taken to be a hostile take over bid. It was only a "strategic investment to add value to the hospital's investors."

Jayawardena's companies have a stake in Asiri Hospital, a popular hospital, and he is planning to set up world-class hospital in Colombo with the help of Raffles Hospital of Singapore.