Minority shareholders of Chakwal Cement Company

We would like to draw your attention towards the acquisition of over 51% stake in Chakwal Cement Company Limited in November 2004 by OCI Cement Group (ORASCOM Group). The group finalised the negotiations and the formal completion of the acquisition took place in March 2005 (as per their web page and the accounts for the quarter ended 31st March 2005).
SIGMA Leasing Corporation Ltd is among one of the minority shareholders of the company. We are of the opinion that the transaction of acquisition is defective as clear violation of rules and regulations of local corporate laws is evident. Our contention in this regard is based on the following facts:
Section 5 of Listed Companies (Substantial Acquisition of Voting Shares and Take-overs) Ordinance, 2002 clearly states that:
(1) No person shall, directly or indirectly acquire
(k) voting shares, which (taken together with voting shares, if any held by such person) would entitle such person to more than twenty five-percent voting shares in a listed company; or
(l) Control of a listed company
Unless such person makes a public announcement of offer to acquire voting shares or control of such company in accordance with this Ordinance.
(2) Before making announcement under sub-section (1), such person shall make disclosure in the manner specified in section 4.
HENCE IT IS EVIDENT:
-- That any person acquiring voting shares which would entitle him to more than 25% voting shares in a listed company must make a public announcement of offer to acquire voting shares or control of such company.
-- The public announcement shall be published in at least one English and one Urdu newspaper having circulation in the province in which the stock exchange, on which the target company is listed is situated.
-- The contents of the public offer, mode of payment and minimum price shall be in such form as may be prescribed by the identified Ordinance.
-- According to Section 13(2) the acquirer is to send such offer letter to all shareholders of the target company.
In case of Chakwal, not only the entitlement for more than twenty five percent of the voting shares but also the control, by the management, was transferred.
Additionally, neither public announcement of offer to acquire voting shares was made nor the acquirer sent the offer letters to the shareholders, as per the requirements of Corporate Rules.
Therefore, we may draw our conclusion that, the minority shareholders were deprived of their fundamental legal rights which must be rectified and they must be compensated financially.
We have entered in to direct correspondence with SECP regarding the matter. SECP has assured us that the subject matter has already been taken up with the Chakwal Cement Company Limited. The desired results are awaited.
(The writer is CEO & Managing Director, Sigma Leasing Corporation, Karachi)