KARACHI: The Gadoon Textile Mills (GADT) approved ‘Scheme of Arrangement’ of merger with Fazal Textile Mills (FZTM) on Tuesday.

The decision comes seven months after the Yunus Brothers Group (YBG) companies first passed a resolution on May 13, 2014, to enter into discussion for evaluation of the feasibility including due diligence and valuation.

The stock prices of both companies have taken a big leap forward in the last seven months. GADT stock on May 13 stood at Rs189, which closed Tuesday at Rs299, while share in FZTM which was at Rs435 seven months ago now trades at Rs853.

The board of GADT and FZTM approved ‘Scheme of Arrangement’ whereby the textile undertaking of FZTM is to be merged with and into GADT subject to obtaining all necessary shareholders, creditors and regulatory approvals and sanctions of the scheme by the High Court along with fulfilment of related legal formalities.

Regarding the swap ratio the company said that 1.550 million shares will be issued in aggregate to the YBG shareholders (representing the sponsor majority shareholders of FZTM). The company added that 3.041m shares will be issued in aggregate to the other shareholders (other than YBG shareholders).

A separate notice by FZTM stated that the directors in their meeting approved scheme of arrangement “whereby the real estate undertaking of the company is to be merged with and into Lucky Landmark (Pvt) Limited, a newly incorporated company and the textile undertaking of the company is to be merged with and into GADT subject to obtaining all necessary approvals..”

Analyst Yusuf M. Farooq at Fortune Securities said that the arrangement translated into swap ratio of 0.34 shares of GADT for every single shares of FZTM.

Published in Dawn, December 17th, 2014