Engro Corporation Limited on Wednesday said to have sold 22.2 percent of its shareholding in Engro Fertilisers Limited (EFERT) at $185 million or Rs 19.3 billion. The development, according to equity analysts, attracted investor attention to Engro which gained 0.4 percent at Pakistan Stock Exchange (PSX). EFERT shed 1.1 percent value to close the day at Rs 67.61.
The business conglomerate would, EFERT CEO Rohail Mohammad told Business Recorder, redeploy the raised liquidity into Engro's new-found investment interest from energy sector. As a stock filing by Company Secretary Andalib Alavi read, the 295 million EFERT shares were bought by local and foreign institutional investors and High Networth Individuals (HNWI's) by way of private placement.
The multimillion-dollar transaction, which Rohail agreed was a part of Engro's investment shift to energy sector, was made at Rs 65.47 per share discovered through a private book building mechanism. Engro Corporation is the holding company having its assets in the form of 80 percent shares in EFERT, 78 percent in Engro Foods and 56 percent in Engro Polymer and Chemicals Ltd.
"It (Fertilizer) is a mature business wherein the upside is low. So we went for the divestment instead of instead of withholding dividend to redeploy liquidity into power projects like LNG and Thar coal," the chief executive said. Putting the size of transaction at $185 million, Rohail said, Engro was to channel at least $150 million of the divestment sum into Thar power and mining ventures.
Asked if more such sell-offs were on the card, the official said the Corporation had already disclosed divesting its stakes in its two subsidiaries: Engro Polymer and Engro Foods. While talks were underway with the Dutch buyer of EFOODs shares, a customer of loss-making Engro Polymer had shown interest to become a stakeholder. Engro Polymer and Chemicals had posted a net loss of Rs 649 million in 2015 compared to Rs 1.02 billion a year ago.
"Due diligence is being done by that party," he said but fell short of naming the potential buyer. Engro is reported to have offered to sell all of its 373 million shares, 56.19 percent, in and management control of Engro Polymer. ATS Synthetic (Pvt) Ltd, along with persons acting in concert, are reported to have been identified as Polymer's potential buyers.
Commenting on the development, analyst Fahad Rauf at Taurus Securities said the deal, besides a cash inflow of Rs 19.3 billion to Engro, would lead to a one time gain of Rs 31 per share in the unconsolidated accounts. "After the divestment, ENGRO shareholding in EFERT would drop from 79% to 57%, resulting in an annualised 28% fall in EFERT contribution in ENGRO profits," he said.
For 2016, the analyst said, Engro's profits would decline from Rs 30.2 to Rs 27.1 per share, assuming impact of lower shareholding for the remaining part of the year. "We believe, probability of a one off dividend is remote as these funds are expected to be directed towards Thar coal mining and power projects," Rauf said. The transaction not only moved the share price of Engro and EFERT but also lured foreign investment to the bourse. "Thanks to Engro Fertilizer (EFERT) private placement, net foreign buying of $76 million was seen today," viewed Hammad Aman, manager equity sales at Topline Securities.
Comments
Comments are closed.