KARACHI: Minority shareholders of Ecopack Ltd — a listed company that makes plastic bottles for beverage firms — have sought the intervention of the Securities and Exchange Commission of Pakistan (SECP) to protect the entity from hostile and allegedly illegal takeover by a group of seven investors.
The seven acquirers “acted in concert” to accumulate over 50 per cent shareholding within a few months without making any regulatory disclosures or tender offer to small investors, according to the minority shareholders.
The hostile takeover attempt culminated on Oct 28, 2022 when four individuals gained control of the company by getting elected to the board of directors. As a result, Kamran Nasir, who served as CEO of JS Global Capital Ltd until September 2022, became chairman of Ecopack Ltd.
The pattern of shareholding shows that the group of seven investors collectively held just 1.28pc shares in the company until February 28, 2022. But their shareholding increased to 36.9pc within the next one month. They kept on accumulating shares from the stock market and crossed the 50pc threshold by June 30, 2022.
Minority shareholders allege a few investors ‘acted in concert’ to buy over 50pc shares in three months
Importantly, none of the seven acquirers crossed the individual limit of 10pc shares to avoid mandatory reporting, which would’ve red-flagged the accumulation of shareholding.
What blew the lid off the takeover attempt were a number of “off-market transactions” carried out at the same rate of Rs18 per share on March 21, 2022. Commonly known as the Negotiated Deals Market (NDM), the trading counter helps brokers conduct transactions among themselves outside the trading system of the Pakistan Stock Exchange (PSX).
Data from the PSX website shows three NDM transactions involving 13.7 million shares, constituting 32.69pc of the total shareholding, took place on the same day and at the same rate among brokers.
The NDM transactions should trigger the takeover laws as the cumulative shareholding bought by two individuals and two companies on March 21, 2022 was well above the threshold of 30pc prescribed in Section 111 of the Securities Act 2015.
In a subsequent letter to the SECP’s Supervision Department, two small shareholders of the company demanded the apex regulator should look into the Unique Identification Number (UNI) data through its surveillance system to confirm the “connivance” of the small group of acquirers that, they believe, have a “direct relationship” with a prominent brokerage house.
“The acquirers acquired shares within a short span of three months and got their four directors elected on the board of (the) target company by issuing proxies in their favour. The intermingling of proxies shows clear collusion to act in concert and hence to take control of the company,” they said.
Speaking to Dawn, Ecopack Ltd Chairman Mr Nasir denied any wrongdoing in the whole affair and added that his shareholding in the company was limited to only 500 shares.
Responding to a question as to how he ended up as chairman despite owning a negligible number of shares, Mr Nasir said the question should be put to those who elected him to the board of directors. “I cannot speak on behalf of anyone else against whom any allegation is made or is a person who is (making) any allegations,” he said.
Ecopack Ltd CEO Hussain Jamil, who’s also the largest shareholder of the company, went to court against Mr Nasir and others in December and obtained a stay order against the attempt to remove him from the position of CEO.
In response to a query, the SECP said the matter is “already under consideration of the commission” and that further action will be taken in accordance with the law.
The PSX spokesperson didn’t respond to the request for comment until the filing of this report.
Published in Dawn, March 29th, 2023