Colombo Dockyard PLC (CDP), one of Sri Lanka’s largest shipbuilding and repair facilities, is poised for a major turnaround with Indian state-owned shipbuilding giant Mazagon Dock Shipbuilders Ltd. selected to acquire a controlling stake in the company. The move, CDP says, is part of an open and competitive process aimed at reviving the financially strained shipyard, which is currently on the Colombo Stock Exchange’s watch list.
In a disclosure to the Colombo Stock Exchange yesterday, CDP confirmed that it has entered into an agreement with Mazagon Dock Shipbuilders and its current controlling shareholder, Japan’s Onomichi Dockyard Co. Ltd., for a strategic investment. The deal, referred to as the “Proposed Transaction,” is structured to take place through a capital infusion into CDP via a Rights Issue.
The company addressed growing speculation in the market following Mazagon’s public mention of a potential $52.96 million investment, which triggered confusion about the valuation of CDP shares. Clarifying the matter, the Board of Directors explained that this figure represents the full investment potential, including all shares acquired through the Rights Issue and any additional shares obtained via a mandatory offer to remaining shareholders.
CDP acknowledged that it is currently grappling with serious financial difficulties, as previously disclosed in its audited financial statements. The company has been flagged under the CSE’s watch list due to concerns over its status as a going concern. Onomichi, the Japanese shareholder that has held a majority stake in CDP for years, has reportedly declined to inject any further capital and has expressed interest in exiting its investment.
In response, CDP actively sought a new investor capable of revitalizing the company through both capital and technical expertise. After a competitive selection process, Mazagon emerged as the preferred partner. The plan involves Mazagon subscribing to the Rights Issue by taking over the rights renounced by Onomichi and potentially buying any unsubscribed shares, thereby gaining control.
Following this capital infusion, Mazagon will be required under the Takeovers and Mergers Code to make a mandatory offer to remaining shareholders, including Onomichi. CDP stressed that the investment is intended to rescue the company from potential collapse and urged investors to seek professional financial advice instead of speculating based on rumours.
The proposed Rights Issue and share pricing are still subject to Board and shareholder approvals, along with regulatory clearance. Full pricing details will be disclosed once these approvals are obtained.
