Philippines operator fails to get more than 35% stake in PICT

Smaller investors unwilling to offload shares due to port’s profitability.

KARACHI:

In corporate democracy, every vote counts. In all possibility, even small shareholders can thwart strategic decisions taken in corporate boardrooms.

This is precisely what appears to have happened in the recent acquisition of a majority stake in Pakistan International Container Terminal (PICT) by Philippines-based International Container Terminal Services Inc Mauritius Limited (ICTSIML).

Established by the Marine Group of Companies, PICT is a dedicated container cargo terminal located at the Karachi port with a maximum handling capacity of 750,000 twenty-foot equivalent units.

Besides attempting to acquire up to a 35% stake in PICT under its definitive Share Purchase Agreement (SPA) with major shareholders, ICTSIML had initially also set out to buy up to 20% shares from the stock market through a tender offer, which remained effective from August 10 to October 10.

However, ICTSIML could only manage to acquire between 5-6% shares through the tender offer, PICT Company Secretary Arsalan I Khan told The Express Tribune in an interview.

PICT’s free-floating shares – which are owned by mutual funds, institutional investors and small shareholders – originally consisted of roughly 32% of the company’s total shares. After the conclusion of ICTSIML’s offer to purchase ordinary shares at a price of Rs150 per share, approximately 26% shares of the company still remain on the stock market.

The Marine Group owned 47% shares in PICT before it signed the SPA with ICTSIML. Subsequently, its stake in the company has fallen and now stands at 32%.The Jahangir Siddiqui Group is another major shareholder in PICT. It sold almost two-thirds of its stake under the SPA. Its post-SPA shareholding in PICT is 7%.

Although the terms agreed upon in the SPA allowed ICTSIML to buy up to 35% shares from major stakeholders, the Philippines-based company settled on acquiring only 29% of the company’s shares. After the purchase of up to 6% shares under the tender offer from the stock market, ICTSIML’s present stake in PICT is around 35%, which makes it the company’s single largest shareholder.

The structure of the PICT board of directors has undergone a significant change in the last board meeting, held on October 19. Four out of the seven members of the board now belong to ICTSIML. Two directors from the Marine Group and one from the JS Group complete the count.

Profitable holding

PICT’s profit-after-tax increased to Rs390.8 million in the quarter that ended on September 30, compared to Rs318.1 million earned in the corresponding quarter in 2011, showing an increase of 22.8%.

“PICT is a mature company with solid cash flows and improving earnings. Therefore, the small investor is holding onto his shares. He is apparently looking forward to either dividends or share price appreciation,” PICT Director Aasim A Siddiqui said while speaking to The Express Tribune.

With a market capitalisation of over $3 billion, ICTSI – the parent company of ICTSIML – currently owns 24 marine terminals and port projects in 17 countries. PICT is the third biggest port terminal that the ICTSI partially owns, in terms of annual volume turnover.

“This proves that it’s a major investment for our foreign partner. Small shareholders know that ICTSI has the ability to attract global shipping companies,” Siddiqui said.

Published in The Express Tribune, November 2^nd, 2012.