KARACHI, June 11: Dawood Hercules Chemicals Limited —the third largest fertilizer producer in the country (after Fauji and Engro), announced on Wednesday that it had acquired 61 million shares in Sui Northern Gas Pipelines Limited, which constituted over 10 per cent voting rights in the gas distribution company.
The announcement was thought to be significant since it was the first such pronouncements ever made by a company under the “Listed Companies (Substantial Acquisition of Voting Shares and Take-over) Ordinance, 2002.”
The company said it was disclosing the transaction to comply with Section 4 of the Ordinance. But given the fact that Dawood Hercules was the corporate raider that had made the first of the two ‘hostile takeover’ bids in the country’s corporate history, many market players were viewing the ‘substantial’ acquisition with interest.
While the Mansha group’s attempt to seize controlling interest in Pakistan’s largest insurance company—Adamjee Insurance—is still being fought in the Courts, Dawood group’s raid to take over Engro Chemicals had been averted through an out-of-court settlement between the parties. By virtue of that agreement, Mr. Hussain Dawood, who was understood to be holding 27 per cent or 36 million of the 153 million outstanding shares in Engro, managed to secure two seats on the seven-member board of directors of Engro.
Dawood Group of Industries is a large conglomerate with nearly nine business units under its fold, six of which are listed at the stock exchanges: Dawood Cotton Mills; Burewala Textile Mills; Lawrencepur Woollen Mills; Central Insurance Company; Dilon Limited and the flagship unit — the Dawood Hercules.
The fertilizer producing company had posted profit of Rs1,131 million for the year ended December 31, 2002, on sales of Rs2,810 million. The board had disbursed cash dividends at 95 per cent, compared with 100 per cent cash distributed the earlier year.
Sui Northern with total assets valued at Rs46 billion, had made Rs1.99 billion in after-tax profit for the year ended December 31, 2002. Net of Rs4 billion paid to the government under gas development surcharge, sales of the company stood at Rs38 billion.
A senior official at Dawood Hercules laughed off the suggestion that the company may be making attempt to wrest controlling interest in Sui Northern. “That’s not the plan, at least at the present moment,” he told Dawn on Wednesday. But given the recent surge in stock price of Sui Northern, many market players had been insisting that there could be no smoke without a fire.
Three months ago on March 11, the 10-rupee share in Sui Northern stood quoted at Rs20.30, but by Wednesday, June 11, it had shot up to Rs34.60, evidencing a whopping gain of 70pc. The stock had more than twice outperformed the KSE-100 index which had risen by 31 per cent during the three months, from 2449 to 3212 points.
Market punters say that the Sui Northern share had galvanised mainly due to block purchases by the Dawood group. But no one really believes that the Group could make a serious raid on Sui Northern, which is currently controlled by the government, which holds 36pc shares in the company. Other big investors, at the last count on December 31, last, were banks, DFIs and NBFIs with 16 per cent; NIT 8 per cent and insurance companies holding 5 per cent. Some 13pc of the 499 million outstanding shares in Sui Northern stood vested in more than 20 thousand small shareholders.