Fauji Fertiliser plans to buy Agritech

Fauji Fertiliser has expressed interest in acquiring Agritech and plans to purchase 80 per cent of the shares.

Fauji Fertiliser has expressed interest in acquiring Agritech on Tuesday and plans to purchase 80 per cent of the company’s shares.

Fauji Fertiliser Company Limited (FFC), makers of urea and diammonium phosphate (DAP) fertilisers, intends to buy approximately 313 million shares of Agritech Limited (AGL), according to a notification sent to the Karachi Stock Exchange (KSE).

However, the number of shares may increase at the time of public announcement of the offer.

Currently, Azgard Nine holds 80 per cent stake in Agritech.

Acquisition of the company will increase the production capacity of FFC by 22 per cent, according to KASB Securities. While capacity growth is the key, AGL’s high debt is a risk to FFC’s current high payouts.

AGL’s deal price is expected to be around Rs29 to Rs30 per share, which implies the deal cost to be between Rs9.1 and Rs9.4 billion, estimated an analyst.

The acquisition amount, however, may be split between the parent company, Fauji Foundation, and its subsidiaries including FFC and Fauji Fertiliser Bin Qasim (FFBL).

AGL’s stock price jumped five per cent during Tuesday’s trading at the KSE to close at Rs23.3 per share while FFC’s stock rose 3.6 per cent to close at Rs10.36 per share.

FFC is not new to acquisitions. In 2002, the company acquired the ex Pak Saudi Fertilisers Limited (PSFL) urea plant situated at Mirpur Mathelo from the National Fertiliser Corporation (NFC) through the privatisation process of the government. The acquisition at Rs8,151 million represented one of the largest industrial sector transactions in the country at the time.

Published in The Express Tribune, August 18^th, 2010.