Business

KAPCO buys 17.37% stake in Hubco for Rs22 billion

100% debt financing used for purchase of the stake

Our Correspondent October 28, 2017

Completion of the transaction remained conditional on the required corporate and regulatory approvals. PHOTO: FILE

KARACHI: Kot Addu Power Company (Kapco) has signed an agreement to buy 17.37% stake in Hub Power Company (Hubco) from Dawood Hercules Corporation and other shareholders at a total price of Rs22.09 billion, according to a bourse filing on Friday.

“Kapco, pursuant to board approval, has executed share purchase agreements for the acquisition of shares and intends to also procure/arrange debt financing for the acquisition,” Kapco Company Secretary A Anthony Rath said in a notification sent to the Pakistan Stock Exchange (PSX).

Hubco power plant loans $1.5b from Chinese banks

The purchase price was Rs109.86 per share with the cumulative purchase price at Rs22.09 billion, he said, adding completion of the transaction remained conditional on the required corporate and regulatory approvals.

Kapco’s share price inched down 0.09%, or Rs0.06, to Rs66.92 with a volume of 217,000 shares at the PSX.

Dawood Hercules’ share price increased 2.39%, or Rs2.83, to Rs121.07 with 60,300 shares changing hands.

Hubco’s share price dropped 0.15%, or Rs0.16, to Rs107.84 with a volume of 1.25 million shares.

Arif Habib Limited’s analyst Tahir Abbas said Kapco would acquire 17.4% shareholding in Hubco which included 14.9% shareholding of Dawood Hercules and remaining 2.5% of other shareholders.

“Our calculation suggests that the transaction is expected to have a positive impact of Rs0.96 per share on Kapco’s bottomline (profit),” he said in a commentary.

The analyst said Kapco would acquire 100% debt financing for purchase of the stake in Hubco. He expected the finance cost at 7.17% (after tax).

Chinese approve $1.5-billion financing for Hubco’s project

JS Research analyst Mehwish Zafar said “as per our initial workings, the potential acquisition will result in an incremental earnings impact to the tune of Rs1.83-2.23 per share on Kapco based on the dividend income from Hubco.”

She said the company had total cash of Rs630 million as of June 2017, where insufficient cash availability might result in debt financing for completion of the transaction.

Published in The Express Tribune, October 28^th, 2017.

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