Buy-out: Chinese firm to acquire Masood Textile Mills

Majority shareholders formally agree to sell 52% shareholding.

KARACHI:

Majority shareholders of Masood Textile Mills have formally agreed to sell 52% shareholding through a Share Purchase Agreement with a Chinese group and two other acquirers, according to a notice sent to the Karachi Stock Exchange (KSE) on Monday.

The decision follows the amended public announcement of intention notification that Shandong Ruyi Science and Technology Group, Nazia Nazir issued on January 3 for the acquisition of up to 31.2 million ordinary shares of Masood Textile Mills through AKD Securities, which is acting as a manager to the offer.

Masood Textile Mills is a Faisalabad-based, vertically-integrated textile manufacturing company with in-house yarn, knitting, fabric dyeing, processing, laundry and apparel manufacturing facilities. It posted a net profit of Rs906.3 million in 2012-13, which was 8.5% higher than its earnings in the preceding fiscal year. Its revenues grew at an annualised rate of 25% between 2008 and 2012.



Speaking to The Express Tribune, Topline Securities research analyst Muhammad Tahir Saeed said the transaction is expected to range between Rs180 and Rs200 per share. This means that the deal should be worth between Rs5.6 billion and Rs6.2 billion.

The company’s total issued shares are 60 million, out of which only 10 million shares constitute its free-float. Two of the three acquirers -- Nazia Nazir – already own 2.3% and 30.1% stakes in the company.

Following the expression of interest by the Chinese group to acquire a majority stake in the company – which is a first-of-its-kind development in the country’s textile sector – the share price of Masood Textile Mills has soared tremendously.

Its per-share price increased to Rs147.78 at the end of trading on Monday, up 153.6% from December 2 when it stood at Rs58.26. The benchmark index increased 8.9% during the same period.

After acquiring 52% stake through this deal, Saeed said, Shandong Ruyi Science and Technology Group is expected to make a tender offer to purchase half of the remaining shareholding – or 24% of the company’s total issued shares.

“I expect the rally (in the company’s stock price) to continue going forward,” he noted.

Masood Textiles Mills produces value-added textile products, whose exports to the European Union (EU) are expected to increase due to the GSP Plus status that Pakistan has recently received.

“Chinese investment in the textile sector coupled with the GSP Plus status shows investors’ confidence and untapped potential in Pakistan’s market,” Saeed said, adding the agreement will encourage other foreign investors to explore investment opportunities in Pakistan.

“This may set a benchmark, which can trigger a re-rating of other companies in the textile sector,” he added.

Published in The Express Tribune, January 14^th, 2014.

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