PSO given the nod to grab majority stake in Pak Refinery

Tribunal dismisses Hascol’s argument that acquisition will reduce competition

ISLAMABAD: The Competition Appellate Tribunal has dismissed an appeal filed by Hascol to prevent Pakistan State Oil (PSO) from acquiring Shell’s shares in Pakistan Refinery Limited (PRL).

In the proceedings, Hascol failed to produce any substantial evidence both before the Competition Commission of Pakistan (CCP) as well as the Appellate Tribunal to establish that the proposed acquisition would lead to a substantial lessening of competition or result in “input foreclosure”.



PSO is one of the sponsor shareholders of PRL with a 22.5% stake along with Shell Petroleum Company having 30% shares and Chevron Global Energy Inc holding 7.5% shares.

They collectively own 60% of the issued and paid-up share capital of PRL (B Class shares) and their relationship as sponsors is governed by the Articles of Association and a participants’ agreement dated March 26, 1970.

According to the agreement, if a participant wishes to transfer any or all of its shares in PRL, such shares will be first offered on identical terms to the other participants in the ratio of their shareholding percentages.



If any participant does not wish to take all the shares offered to it, the same will be offered to the remaining participants in the ratio of their shareholding percentages and at the same price and on such other terms as stipulated in the original offer.

If the need arises, further offer will be made on the same basis until all the shares to be disposed of are acquired by the other participants or until it is ascertained that there is a share or shares which none of the participants wish to take up.

Any shares offered by a participant which are not acquired by the other participants may be sold to other purchasers (a third party) subject to provisions of the participants’ agreement.

Ordinary people may hold the remaining 40% shares in PRL (Class A shares), which are listed on the Pakistan Stock Exchange.



On May 4, 2015, PRL issued the Letter of Rights in line with the decision of its board of directors, offering its shareholders 800% of the total shares that the respective shareholders held as on April 10, 2015 at par value of Rs10 per share as the rights issue.

Shell conveyed to PSO and Chevron on May 15, 2015 its unwillingness to increase its investment in PRL and sought offers from the two companies for the 84 million ordinary shares offered to Shell under the rights issue.

Of these, 63 million shares were offered to PSO and the remaining 21 million to Chevron in accordance with provisions of the participants’ agreement.

According to the agreement, if Chevron failed to accept Shell’s offer within the prescribed 30 days, PSO would also become entitle to acquiring the 21 million shares offered to Chevron.

PSO conveyed to Shell its intent to acquire, subject to Chevron’s response, all the 84 million shares.

On June 16, 2015, PSO and Shell signed a share purchase agreement for the acquisition of 84 million shares in PRL. After that, PSO’s shareholding in PRL will increase from 22.5% to 49.16%.

In order to meet regulatory requirements, PSO filed a pre-merger clearance application for approval of the CCP. In the meantime, Hascol lodged a complaint against the transaction.

In its order on March 1, 2016, the CCP granted unconditional approval to PSO for acquisition of 63 million right shares in PRL and conditional approval for 21 million shares subject to final decision of the Sindh High Court.



The CCP categorically declared that the merger transaction was not anti-competitive.

Hascol filed an appeal, challenging the order on March 1, 2016 before the Competition Appellate Tribunal.

PSO and other respondents defended the CCP’s order whereby it was held that there was no evidence to suggest the existence or possibility of anti-competitive foreclosure or substantial lessening of competition by creating or strengthening of the dominant position in the relevant markets.

Published in The Express Tribune, December 22^nd, 2016.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.