21 February 2004	Saturday	29 Zilhaj 1424

KARACHI, Feb 20: Dawood Hercules Chemicals Limited bought over 31 million shares in Sui Northern Gas Pipelines Limited late last month, taking its aggregate stake in the gas company to 22.44 per cent.

Sui Northern Gas Pipelines-the bigger of the Sui twins- has paid up capital of Rs5 billion in 500 million shares of Rs10 each. Sixty per cent of the total stock in the company is held by the Government of Pakistan, while 40 per cent represented free float.

Sui Northern had resumed cash payouts from 2001, after nine blank years. One of the best performers during the current stock market boom, the stock price in Sui Northern has risen by 148 per cent in a year, from Rs23.30 in February 2003 to Rs58 currently.

Prior to the current acquisition, Dawood Hercules-one of the two largest urea producers in the country-already held 81 million shares in Sui Northern, representing 10 per cent equity interest in the company.

The fertilizer producer acquired the recent stock in two lots: 21 million shares at Rs52.14 on January 26 and another 10 million shares the day after at Rs52.60. The cost of acquisition stood at Rs1.6 billion.

Dawood Hercules has not stated why it thought fit to raise its stake in the gas utility, but analysts said it looked something like a 'vertical integration'.

Sui Northern was the major supplier of gas to the urea producer. At the height of winter season, due to shortage of gas, fertilizer producer experienced disruption in the supply of gas.

Analyst say acquisition of larger equity in Sui Northern could help the company in putting its nominees on the board at some later stage.

The market price of share in Dawood Hercules is as high as Rs200.50, up from Rs142.50 at this time last year. Figures released recently by the National Fertilizer Development Corporation (NFDC) indicate urea demand in the country to have soared by 47.1 per cent in January this year.

This was attributed to improved water supply, overall fertilizer demand; improved farmers cash flow and availability of credit and favourable weather. Domestic fertilizer prices during January already edged higher by 1-2 per cent. All of which could suggest that urea producers may be making big money this season.

But its not just the fertilizer on which the Dawood group has been concentrating. Acquisition of equities in sound companies for 'vertical integration' seem also to be of interest to the group.

Early last year, Dawood Hercules was widely believed to have attempted to acquire management control in the competitor urea producer-Engro Chemicals-which then looked like the first 'hostile takeover' bid witnessed in the corporate history of the country. But at the elections to the seven-member Board of directors of the Engro Chemicals held on April 10, take-over bid was averted.

As a result of out-of-court settlement between the parties, Dawood group took the two seats at the Annual General Meeting held on April 10 last year; a stock broker sat on one of minority shareholders and the rest of the four places were occupied by nominees of Engro management. At the time, sponsors of Dawood Hercules were thought to hold 27 per cent or 36 million of the 153 million outstanding shares in Engro Chemical.

The decision by Dawoods to step back and let the existing management continue was taken by the market as a good news, for resources of the group were thought to prove useful in facilitating Engro's expansion plans, which had been hampered for want of larger funds.