Following Lucky Group also known as Yunus Brothers management takeover of ICI Pakistan from AzgoNobel, the acquirers have made public announcement to purchase shares of ICI Pakistan, said the analysts at Topline Research.
This announcement is in line with the Listed Companies Ordinance or commonly termed as Takeover Law or Substantial Acquisition Law. The good development for minority shareholders is that this announcement is made ahead of its schedule providing hope that the tender offer and final payment will also be completed before the maximum timeline of 90 days after the public announcement. Though, we do not cover this thinly traded stock, but we believe that with emergence of arbitrage-like investment opportunity the stock is likely to catch investors’ interest in coming days in line with similar trend seem in other stocks in which tender offer was issued to minority shareholders.
Takeover Ordinance in Pakistan was issued in 2002 called Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Ordinance, 2002. According to that all listed companies acquiring more than 25% shares has to issue a public announcement of offer mainly to provide fair and equal treatment to all shareholders. Many amendments have been made in this rule since its issue in 2002. The acquirer has to acquire at least 50% of the remaining share. The public offer price should not be less than the acquisition price or higher price arrived through few other formulas as mentioned in the regulation. In this case the agreement between ICI Omricron/Agzo Nobel and Lucky Group was signed on July 27, 2012 and the public announcement was now been made according to which Lucky Group has shown its interest to buy 11.2mn shares which is 50% of float available in the market at a price of Rs186.42 while the market price is Rs173.16 lower, 7.1% than the acquisition price.
After the public offer, the process of tendering the shares will be completed in 60 days or before while another 30 days or before the shareholders will receive their payment. In this case the minority shareholder who will accept the offer will get money back by mid January or earlier. Historically it has been observed that all minority shareholders do not tender and thus the chance of acceptance is more than 50%. In Byco 100% of shares tendered were bought by the acquirer while in case of Network Micro Finance it was 60%.
Taking into consideration the historical trend and the fact that many old shareholders, employees funds and those having physical shares normally don’t tender, there is high probability that all 22mn shares may not be tendered . In case 77% of shares are accepted that is minority shareholders tendering 14mn out of 22 mn, the scenario translate into break-even for the investors assuming the share to trade at close to our fair price of RS120-130. In alternative scenario, with 100% acceptance it translate into a gain of 8% for holding period of less then 3-months. While 50% acceptance in worst case will result in negative return of 10% in the next 3-months.
Lucky’s purchase offer
