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KARACHI: The saga of the sale of DH Fertilisers Ltd (DHFL) to Pakarab Fertilisers by Dawood Hercules Corporation Ltd (DHCL) appeared to draw to a close on Monday as the DHCL board announced to enter into a Share Purchase Agreement (SPA) with Pakarab to sell its entire holding in DHFL at a ‘price to be determined in accordance with the provisions of SPA’.

The seller explained that the price was essentially the differential between the agreed enterprise value of DHFL, amounted to Rs6.6 billion, and the total long-term loans that stood at Rs4.6bn “and at present, the price is approximately Rs2bn”.

The shareholders in DHCL greeted the news with enthusiasm, as the price of company’s stock spiralled upwards to its ‘upper circuit’, representing a gain of Rs5.60 to close at Rs117.77.

The board did not say but DHFL, previously called Dawood Hercules Chemicals Ltd, had been a drag on its wholly-owned principal, the DHCL.

The major activity of DHFL was marketing urea fertiliser under the brand name ‘Bubber Sher’, manufactured at Chichokimallian’s plant in Punjab.

Over the years, the key concern of the company has been the non-availability of gas in the Sui Northern Gas Pipelines (SNGPL) network. In the latest quarter (ended March 31, 2015) the company suffered operating loss of Rs216 million.

The process of talks on sale-purchase by the two parties had commenced way back in September 2012, with the signing of a Memorandum of Understanding (MoU).

But by winter of that year, the talks broke down as the ‘sale-purchase deal lapsed’ and DHCL informed Pakarab that it no longer wanted to pursue the transaction ‘for commercial reasons’, which many thought was Dawood group’s disenchantment with SNGPL’s discriminatory gas supply policy.

Taking the deal off the table irked the proposed buyer and the matter was dragged to the courts.

However, in DHCL director’s report for the year ended Dec 31, 2014, it was noted that the company had re-initiated its negotiations with Pakarab to find an out of court settlement regarding suit for sale.

“Negotiations have been progressing well and we expect to arrive at a definitive solution by end of March 2015,” said Chairman Hussain Dawood and CEO Samad Dawood, who jointly signed the directors’ report.

In its third quarter (Jan-March) report, directors noted: “The negotiations with respect to the out of court settlement stalled due to certain factors beyond the control of the buyer.”

The DHCL Monday’s announcement indicates that the parties may have finally decided to return to the negotiating table and strike a deal.

Pakarab Fertilisers Ltd is a Fatima group company, not listed on the stock exchange. The company held Rs48bn in total assets as of Dec 31, 2013.

Published in Dawn, June 16th, 2015

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