BYCO may acquire Admore

Transaction value could be in the vicinity of Rs4b.

KARACHI: There are rumours in the market that Byco, which is hungry to find new avenues to market its bulk supplies, is eager to acquire Admore, according to Topline Securities.

With oil price deregulation on the cards coupled with growing circular debt in the energy sector, there are chances that small oil marketing companies (OMCs) like Admore, Hascombe and Overseas Oil Trading Company (OOTCL) will be taken over by big local refineries, said Topline Securities analyst Farhan Mahmood.

Various industry sources have confirmed that such a deal is in the pipeline and Byco is evaluating this transaction, said Mahmood.

Though it is difficult to determine the exact value of the deal due to limitation of data, the transaction value could be around Rs4 billion, Mahmood wrote in the company research report.

Fourth largest after Admore acquisition

Byco will become the fourth largest oil marketing company in terms of its retail network if it acquires Admore, said Mahmood.

The company needs a wider retail network to market its bulk supplies as it is in the process of building the country’s biggest refinery, which can process 100,000 barrels per day. The refinery is expected to be online in the next few months.

No details have been shared by the company’s management regarding the commissioning of the new refinery and its design. However, if it is assumed that all retail products will be marketed through its own network, then the company needs more than 2,500 retail outlets, said Mahmood.

Admore has 390 operational retail outlets, of which 83 are in Sindh, 254 in Punjab, 44 in Khyber-Pakhtunkhwa, two in Balochistan and seven in Azad Kashmir, according to the 2009 petroleum statistics.

Interestingly what is happening with small OMCs like Admore is that their sales ratio to retail outlet is low due to non-availability of the product. Big OMCs sell their products to these small OMCs and thus the market share of small OMCs, despite their ability to sell, remain low, said Mahmood.

Published in The Express Tribune November 25^th, 2010.