KARACHI, May 18: The Dewan Mushtaq group's acquisition of controlling stakes in Pakland and Saadi Cement companies has been well received by the market, but investors ponder on some unanswered questions.

Dewan Mushtaq Group acquired 36.2 million shares of Saadi Cement and 34.6 million shares of Pakland Cement. The acquisition would give the new owners an effective holding of 116.2 million shares or 62.8 per cent in Saadi as 80 million shares of Saadi Cement are parked in Pakland.

The group has also acquired 34.6 million shares (41.9 per cent holding) in Pakland. The company has also made a tender offer for buying out 7.4 million, equivalent to 8 per cent shares of Pakland at a price of Rs16 per share.

If and when that transaction is completed, the group would hold 50.9 per cent shares in Pakland. Instead of a company name, the Dewan Mushtaq Group has gone on to acquire stakes in the group name.

Earlier in the acquisition of Allied Tractors, also the same philosophy was followed. On Tuesday's trading at the Karachi Stock Exchange, the price of Pakland Cement gained Rs1.60 to close at Rs23.25 with trading in 8.5 million shares.

Saadi Cement added 30 paisa to close the stock price at Rs15.10 with a volume of 24 million shares. The price of both stocks had been experiencing an upswing in recent times.

"The information available is still not enough to form a concrete view on the outcome of this takeover," says Mohammed Sohail, head of research at InvestCap. He observes that at first glance it is obvious that Dewan Group would invest Rs1.1 billion in acquisition of 36.2 million shares of Saadi and 34.6 million shares in Pakland.

The analyst reckons that the Group would also pick up the liabilities of Saadi, amounting to Rs5.5 billion (principal plus interest) as of December 31, 2003 and Pakland's Rs6.5 billion (principal plus interest) as of June 30, 2003.

The effective cost of acquisition to the acquirer would thus work out to be Rs6.1 billion for Saadi and Rs7bn for Pakland. According to InvestCap, the enterprise value (value of equity and loan) of Saadi would amount to Rs8.4 billion and that of Pakland it would be Rs7.8 billion.

But there are questions that beg answers: First of all, why is the acquiring group putting up a low price of Rs16 for 7.4 million shares of Pakland for the offer from shareholders, when the market value is around Rs23.

Sohail at InvestCap thinks that since shareholders are not likely to offer their stake at the tender price of Rs16, punters would jack up the value of Pakland scrip, forcing the acquirers to revise the tender price.

The acquiring group would also perhaps clarify whether an agreement has been reached with existing lenders with regard to loan restructuring.