Karachi: Lucky Cement Limited in consortium with other group entities of Yunus Brothers Group has acquired 75.81 percent shareholding in ICI Pakistan Limited at a bid value of $152.5 million payable in equivalent Pakistani rupees.
According to a company statement, the shares purchase transaction will be completed once all the regulatory approvals are obtained and the Public Tender offer as per the requirements of Listed Companies Regulations 2008 has been completed.
Lucky Cement Limited – the flagship company of Yunus Brothers Group lead the consortium with 50 percent share in the acquisition followed by Yunus Textile Mills Ltd, Gadoon Textile Mills Ltd, Lucky Textile Mills Ltd and YB Pakistan Ltd, statement said.
Through this successful acquisition, the Yunus Brothers Group consortium has acquired majority shareholding of 75.81 percent in ICI Pakistan held by ICI Omicron, a 100 percent owned subsidiary of AkzoNoble, it said.
The ICI Pakistan has recently de-merged the company and separated its businesses in two entities namely AzkoNobel Pakistan having paint business and ICI Pakistan Limited having PSF, Soda Ash, Life Sciences and a Captive Power Plant of 22 MW power generation capacity, it added.
What analysts forecast?
ICI share price to rally while Lucky may come under pressure after Lucky’s led consortium aggressive bidding to buy 75.81% share of ICI.
The investors may take opportunity to buy ICI to make money from the tender offer while they may offload Lucky amid fear of low dividend payout as it may divert funds for this acquisition.
To diversify and expand its business portfolio, Consortium of Yunus Brothers Group has acquired 75.81% stake (70mn shares) of post de-merger entity ‘ICI Pakistan’ from ICI Omicron B.V. Though not confirmed but media reports suggest that Lucky which is the major party in the consortium will acquire 38% share of ICI (approx.35mn shares) while the remaining 38% will be acquired by Yunus Textiles, Gadoon Textile, Lucky Textile and Yunus Brothers Company.
Tender offer likely to follow
As per Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Ordinance 2002, any company acquiring more than 25% shares has to issue a tender public offer mainly to provide fair and equal treatment to minority shareholders. And the acquirer has to buy at least 50% of the free float of 22mn shares. The public ICI may rally, Lucky may not
Pakistan pulse offer price should not be less than the acquisition price or higher price arrived through few other formulas as mentioned in the regulation. This mean that Consortium needs to buy another 11mn shares at Rs206 i.e Rs2.3bn
Impact on Lucky
Out of Rs16.8bn transaction (at price of Rs206), Lucky share would be around Rs8.4bn. We believe the company has currently cash of Rs3.0-3.5bn (assuming no retirement of short-term debt) out of which quarterly working capital requirement could be Rs0.6bn. In our view, the Rs8.4bn transaction (including tender offer) will be financed through 50% equity and 50% debt.
But thanks to better margins amid high cement prices and decline in coal prices, we believe Lucky may generate Rs11-12bn of cash in FY13 and thus there will be chances that portion of the debt may be retired earlier.