Buyer of Engro Foods offers 24% higher price

Will pay Rs151.85 per share and buy 49.8m shares from general public

KARACHI: The Dutch acquirer of Engro Foods announced on Friday that it would buy ordinary shares from general shareholders at Rs151.85 per share, which is 24% higher than the price it has agreed to pay for a majority stake in Engro.

The acquisition laws of Pakistan make it mandatory for the acquirer of a substantial stake to buy some 50% of ordinary shares from general shareholders to give them benefits of the deal.

Accordingly, Friesland­Campina Pakistan Holding BV, a subsidiary of Royal Friesland­Campina, Nether­lands would purchase 49.8 million ordinary shares in Engro Foods from general shareholders, Citibank Pakistan, the manager to the offer, said in a notification to the Pakistan Stock Exchange (PSX).

The general public holds around 115 million shares in Engro Foods.

The announcement was well received by stock investors at the PSX. The share price of the food company hit the upper limit of 5%, up Rs6.96, to close at Rs146.31 with a turnover of 4.20 million shares.

The share price of Engro Corporation, the parent firm of the food company, increased 1.17%, or Rs3.38, and closed at Rs291.25 with a volume of 2.87 million shares.

Danish Ali Kazmi, an analyst at Alfalah Securities, said in a note that the offered price of Rs151.85 per share to the general public was the average price quoted by the stock exchange with the highest traded volume over the past six months.

As per regulations, the acquirer would calculate the offer price by using five different methods.

The other four methods did not allow the Dutch company to offer a price higher than Rs132.49 per share, he added.

Earlier, FrieslandCampina Pakistan Holding BV signed a share purchase agreement with Engro Corporation to acquire 51% (391 million) shares in Engro Foods. The purchase price is Rs122.31 per share.

Royal FrieslandCampina will hold around 80% of the legal entity while the International Finance Corporation and Dutch development bank FMO will hold the remaining 20% shares.

“Overall, the deal is valued at $470 million,” Kazmi said.

Arubah Zia, an analyst at BMA Capital, said “the transaction will result in a one-off gain of Rs38.2 billion (Rs73 per share) on the books of Engro.”

It would continue to remain a company listed at the PSX after the transaction is done successfully.

Published in The Express Tribune, October 1^st, 2016.

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