KARACHI: The life insurance subsidiary of TPL Corporation Ltd is going to have a reverse merger with Dar-es-Salaam Textile Mills Ltd to achieve the listing status.

A reverse merger allows a private entity — TPL Life Insurance Ltd in this case — to become a publicly traded firm simply by acquiring controlling shares in a listed entity. In other words, the private firm goes public without going through the tedious and costly process of an initial public offering (IPO).

Dar-es-Salam Textile Mills Ltd is a dormant spinning business that currently rests on the defaulter’s counter of the Pakistan Stock Exchange (PSX). It made a net loss of Rs1.8 million in the July-September quarter of 2023-24. The total value of the dormant textile firm is Rs74m based on the existing price of Rs9.25 per share.

Many reverse mergers have taken place in the recent past as private companies find it more feasible to acquire dormant listed companies than going public in the conventional way, which involves hefty listing and regulatory fees.

For example, “estimated expenses of the issue” in an IPO recently held on the PSX amounted to over Rs31m.

TPL Corporation Ltd said on Wednesday the boards of directors of the two companies have agreed to a draft scheme of arrangement, which will lead to the merger of life insurance business into Dar-es-Salaam Textile Mills Ltd. The name of the merged and listed entity will become TPL Life Insurance Ltd as Dar-es-Salaam Textile Mills Ltd will issue shares to the shareholders of TPL Life Insurance based on a swap ratio of one for one.

TPL Corporation Ltd controls 97.5pc shares in its life insurance subsidiary. The insurance provider posted a net loss of Rs24.6m in July-September versus a negative bottom line of Rs29m a year ago.

Published in Dawn, November 30th, 2023