PICIC, Crescent Star Insurance deal back on track
Both are among smaller players in the country’s non-life insurance industry .
The board of the merged entity will likely be dominated by sponsors of Crescent Star Insurance, as its equity is higher than the current equity of PICIC Insurance. PHOTO: FILE
KARACHI:
Almost two weeks after the collapse of negotiations in the merger of PICIC Insurance with Crescent Star Insurance, the proposed deal is now back on track, PICIC Insurance said on Tuesday.
“It is now hereby intimated that the sponsors of (PICIC Insurance) and Crescent Star Insurance have revisited the proposition and have re-agreed to proceed with the said proposed merger,” said PICIC Insurance Company Secretary Afroz Quraishi in a public notice.
Earlier on June 10, the company stated that the two parties had decided against the proposed merger. Neither company mentioned the exact reason for the collapse of the deal at the time, although news reports suggested Crescent Star Insurance had become ‘disillusioned’ with the balance sheet of PICIC Insurance during the due diligence exercise.
PICIC Insurance has been facing solvency issues, as its accumulated losses put a big dent into its paid-up share capital of Rs350 million. Its equity amounted to just Rs68.9 million at the end of March 2016 because of the accumulated losses of Rs281.1 million.
PICIC Insurance had announced plans in September 2015 to raise Rs350 million through right shares, which would provide it with fresh equity and enable it to meet its minimum solvency requirement. However, it withdrew the right issue in January and sought the regulator’s approval for issuing 70 million right shares at a discount of Rs5 per share instead.
PICIC Insurance and Crescent Star Insurance are among the smaller players in the country’s non-life insurance industry. Each of the two companies has total assets of less than Rs1 billion, which makes them a part of the nine-member group of the smallest non-life insurance companies.
In terms of profitability, however, Crescent Star Insurance is better than PICIC Insurance. The former posted a net profit of Rs4.4 million in the first three months of 2016 while the latter made a net loss of Rs841,000 over the same period.
In the case of a merger, sponsors of both companies will keep their stakes in the merged entity. But the board of the merged entity will likely be dominated by the sponsors of Crescent Star Insurance, as its equity (Rs645.2 million) is higher than the current equity of PICIC Insurance (Rs68.9 million).
Crescent Star Insurance is already on an expansion spree, with its eyes set on steel and food sectors. It is investing up to Rs450 million in Dost Steels by underwriting the steel manufacturer’s shares. Similarly, it has also signed a franchise agreement with the Golden Chick American Tender Fried chain of restaurants through its subsidiary Crescent Star Foods.
Published in The Express Tribune, June 22nd, 2016.
Almost two weeks after the collapse of negotiations in the merger of PICIC Insurance with Crescent Star Insurance, the proposed deal is now back on track, PICIC Insurance said on Tuesday.
“It is now hereby intimated that the sponsors of (PICIC Insurance) and Crescent Star Insurance have revisited the proposition and have re-agreed to proceed with the said proposed merger,” said PICIC Insurance Company Secretary Afroz Quraishi in a public notice.
Earlier on June 10, the company stated that the two parties had decided against the proposed merger. Neither company mentioned the exact reason for the collapse of the deal at the time, although news reports suggested Crescent Star Insurance had become ‘disillusioned’ with the balance sheet of PICIC Insurance during the due diligence exercise.
PICIC Insurance has been facing solvency issues, as its accumulated losses put a big dent into its paid-up share capital of Rs350 million. Its equity amounted to just Rs68.9 million at the end of March 2016 because of the accumulated losses of Rs281.1 million.
PICIC Insurance had announced plans in September 2015 to raise Rs350 million through right shares, which would provide it with fresh equity and enable it to meet its minimum solvency requirement. However, it withdrew the right issue in January and sought the regulator’s approval for issuing 70 million right shares at a discount of Rs5 per share instead.
PICIC Insurance and Crescent Star Insurance are among the smaller players in the country’s non-life insurance industry. Each of the two companies has total assets of less than Rs1 billion, which makes them a part of the nine-member group of the smallest non-life insurance companies.
In terms of profitability, however, Crescent Star Insurance is better than PICIC Insurance. The former posted a net profit of Rs4.4 million in the first three months of 2016 while the latter made a net loss of Rs841,000 over the same period.
In the case of a merger, sponsors of both companies will keep their stakes in the merged entity. But the board of the merged entity will likely be dominated by the sponsors of Crescent Star Insurance, as its equity (Rs645.2 million) is higher than the current equity of PICIC Insurance (Rs68.9 million).
Crescent Star Insurance is already on an expansion spree, with its eyes set on steel and food sectors. It is investing up to Rs450 million in Dost Steels by underwriting the steel manufacturer’s shares. Similarly, it has also signed a franchise agreement with the Golden Chick American Tender Fried chain of restaurants through its subsidiary Crescent Star Foods.
Published in The Express Tribune, June 22nd, 2016.