KARACHI: Fauji Cement Company Limited (FCCL), in its latest notice to Pakistan Stock Exchange (PSX), has informed the stakeholders of a Board approval for a scheme of amalgamation with Askari Cement Limited (ACL).
Although shareholders will give the final nod in an AGM, as per Companies Act 2017, this merger will transfer all of ACL’s properties, assets, and liabilities to FCCL. In return, the shareholders of ACL will be awarded a holding in FCCL under a share swap scheme of 5:1.
While FCCL has an outstanding capital of 1,379.815 million shares, as per two year old accounts of Askari Cement, the company has issued 160 million shares to its existing owners. Under stated swap agreement, ACL shareholders will be issued 800.493 million new shares of FCCL. Post-merger, FCCL’s share capital will go up to 2,180.309 million shares. This however, should not be worrying, Misha Zahid at Arif Habib Limited said.
Pertinently, Askari Cement Limited has an annual capacity of 2.80 million tons against FCCL’s current capacity of 3.43 million tons. This implies an 82 percent addition to current capacity, which, together with FCCL’s announced greenfield expansion of 2.05 million tons in North (D.G. Khan, Punjab) and ACL’s brownfield expansion of 2 million tons, will render FCCL to become the third largest player in the country with a capacity of 10.3 million tons.
Post-merger and expansion, ACL will add 47 percent to the total capacity (4.9 million tons out of the total 10.3 million tons) in the new entity, whereas its current owners will hold nearly 37 percent in shareholding (800 million shares out of 2,180 million shares). Albeit, this deal will be beneficial for both ACL and FCCL, as the company’s cumulative market share will aid its augmented presence in North (third largest capacity in the region after BWCL expands by 2.16 million tons to 12 million tons and LUCK expands by 3.15 million tons to 15 million tons).
On the financial side, FCCL’s book value will go up from Rs 17.85/share to Rs 21.78/share, based on latest available financials (first quarter of FY21 for FCCL and FY20 for ACL). Please check Exhibit number 1. “Albeit, we expect a slight dilution in earnings of around 2 percent, please check Exhibit number 2.”
Copyright Business Recorder, 2021
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