Dutch company acquires 51% stake in Engro Foods

Engro Corporation has signed an agreement with a Netherlands-based dairy company for the sale of up to 51% shareholding in Engro Foods at an estimated price of $448 million, a securities filing said on Monday.

Engro Corporation currently controls approximately 87% shareholding in Engro Foods while the general public owns the remaining outstanding shares. The deal will take place at Rs120 per share, which reflects a discount of about 26% to Engro Foods’ current share price of Rs163.

The majority stake in Engro Foods will be bought by a legal entity in which Dutch dairy cooperative FrieslandCampina will hold approximately 80% shares. International Finance Corporation (IFC) and Dutch development bank FMO will hold the remaining shares in the legal entity.

The share price of Engro Corporation rose 1.4% to Rs337.6 on Monday while the stock of Engro Foods shed 5% to close at Rs155.17 per share.

Engro Corporation said in a statement it will stay on as a “significant partner and shareholder” under the new company structure. The stake of Engro Corporation in Engro Foods will likely be around 36% post-transaction.

The Dutch company is required under the local takeover laws to make an attempt to purchase at least half of the shareholding currently owned by the general public.

The provision is supposed to ensure that ordinary shareholders also benefit in case the sponsors of a listed company sell their stake in a major deal. This means general investors will also have a chance to avail the public offer extended by FrieslandCampina to sell at least half of their 13% current holding in Engro Foods.

Any number of shares that ordinary shareholders decide to sell to FrieslandCampina will be adjusted against the shareholding that the Dutch company is supposed to acquire from Engro Corporation.