Karachi: Pakistan’s largest conglomerate Engro Corporation is being supported by unidentified investors in the stock by accumulating its shares aggressively, which pushed up its share prices 46% since the start of this calendar year beating the benchmark KSE 100 Index by 19%.
The company has witnessed several setbacks in the recent few months which included leadership and gas crises that dragged the company in the losses from huge profits of previous year.
The gossip of accumulation of Engro’s shares was in spite of difficult times that the company is passing through due to acute gas shortages severely affecting the US$1bn new fertilizer plant.
It has been found out through various reliable checks that the market gossip is correct and the recent change in the shareholding structure also verifies this fact.
Engro Corp consists of Fertilizers, Foods, Power Generation, Terminal, PVC Resin and commodity trade business.
Changing Shareholdings in Engro Corporation
According to the Dec 31 accounts of Engro Corp, four firms of Hussain Dawood Group owns approx 47-48% shares with Dawood Hercules having 33% followed by Patek 7% and then Cyan 5% and DH Fertilizer 3%.
However the latest figures show another foreign shareholder has accumulated close to 9.5% shares thereby attaining the post of second largest shareholder after Dawood Hercules.
It is believed that some selling by Hussain Dawood Group companies, by employees and local and foreign institutions amid company’s deteriorating financial has provided opportunity to the new shareholder to buy the stock without much impact on the share price.
Reporting if one party has more than 10% holding
According to local regulations any shareholder who acquires more than 10% voting shares in a listed company shall disclose the aggregate of his shareholding in that company to the said company and to the stock exchange on which the voting shares of the said company are listed, unless special exemption granted by the regulator. So far no such disclosure has been made that means that the shareholding would still be less than 10%. May be as a matter of strategy the new shareholder may have stopped buying intentionally by accumulating the quantity of slightly less than 10%
Employee buyout and hostile takeover
In 1991, employees of Exxon Chemical Pakistan in partnership with leading international and local financial institutions bought out Exxon’s share. At the time of buyout, employees of Esso (Eastern) purchased 28% stake in Exxon Chemical which later become Engro Chemical Pakistan (ECPL).
Due to higher than average share float in the market the company has seen takeover attempts. In the year 2000, Employees Management Group went to court to stop a hostile take-over in the wake of accumulation of shareholding by the Hussain Dawood Group.
However later on Hussain Dawood Group and the Employees Management Group entered into a dialogue to settle the issue out of court, taking a conciliatory approach. It is too early to say that the recent change in the shareholding pattern is yet another attempt to takeover the conglomerate, but the development is worth following.