OPI Gas bid of around Rs33 per share for 67.91 per cent shares of Shell Gas was accepted by Shell Pakistan, the local subsidiary of Royal Dutch Shell, a Netherlands-based global integrated oil exploration, natural gas, and petroleum product marketing company.
The remainder of the shares of Shell Gas are held by individual and institutional investors through its listing on the Karachi Stock Exchange.
Representatives from both companies could not be reached for comment.
The deal price represents almost a 33 per cent discount over Shell Gas closing price of Rs48.92 on Monday. It was unclear as to why Shell Pakistan agreed to such a discount though some sources familiar with the matter suggest that the market was overly exuberant and had overpriced the stock.
At its current closing price, the stock is trading at 3.7 times its book value the difference between its assets and liabilities. The deal values the stock at 2.5 times its book value.
As a result of the merger between the two companies, OPI – currently a private limited company – will become a publicly listed company on the KSE.
OPI Gas (Pvt) Ltd is a subsidiary of the Hashoo Group, one of Pakistan’s largest conglomerates with interests in real estate, hospitality, travel services, chemicals, oil and gas, commodity trading, pharmaceuticals and mining. The largest shareholder of the group is Saddaruddin Hashwani who founded the group in 1960.
OPI Gas is in the business of bottling and marketing liquefied petroleum gas (LPG) from fields owned by British Petroleum (BP) and the Oil & Gas Development Corporation (OGDC). Shell Gas also markets LPG, though it gets its supply from refineries.
Shell Pakistan decided to sell its LPG subsidiary in February 2010 owing to a decision made by its global parent company to exit the LPG business and focus on fewer business lines. The decision was made independently of the profitability of Shell Gas, which reported a net income of Rs72.1 million for fiscal year 2009. JS Private Equity, Power Gas and Jamshoro Joint Ventures were the three other bidders.
Sources familiar with the matter said that OPI will pay for the shares of Shell Gas in cash (as opposed to a share swap). The deal will be financed through a combination of debt and equity, though the precise terms of the financing were not available at this point.
OPI is a clear beneficiary of this transaction since it acquires gas supply contracts of 25,000 tons per annum from three different refineries just as it approaches the expiration in December 2012 of its supply contract with BP.
Published in the Express Tribune, June 8th, 2010.
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