KARACHI, Sept 1: The ICI Pakistan Limited, on Wednesday, announced that it had sold all of its 25 per cent stake in the Pakistan PTA Limited at Rs10.50 a share. The news came as a bolt from the blue for investors; not because of the sale, but due to the price.

Within a minute of the announcement, the price of the ICI share plunged by Rs2 on the stock market. Opening at Rs93.85 on Wednesday, the share in the ICI closed down by Rs2.25 at Rs91.60. That was quite the opposite of what most investment managers were expecting.

The Pakistan PTA Limited (PPTA) was a drag on the ICI and investors thought the price should climb after the shareholders gave their approval for its sale at the ICI's Extraordinary General Meeting on August 20. The first indication that the company intended to dispose off its entire shareholding in the PTA, was conveyed by the Board on June 15, which had sent the share scurrying to Rs97.85.

The stock went into a downward correction later on, but again in a week since last Wednesday, the share had climbed from Rs84 to Rs94. The company's announcement that it had sold and transferred 25 per cent equity at the price of Rs10.50 for a share in the PPTA poured cold water on investors' enthusiasm, many of whom were looking at the ICI to climb up to Rs97.

But lets first consider the announcement made by the ICI Pakistan's Chief Executive, John R. Stoney. He said that pursuant to the authorization given by the members of the ICI Pakistan Limited at the ExGM on August 20, 2004, the company had on September 1, sold and transferred 286.2 million ordinary shares of Rs10 each of the Pakistan PTA Limited, which represented 18.9 per cent of the total issued share capital of the PPTA, at a price of Rs10.50 per share, that was, for an aggregate sale price of Rs3,005 million "through a privately placed block trade arranged by the Elixir Securities Pakistan (Private) Limited". The United Bank Limited had acted as financial advisers to the company.

The announcement further stated that the company had also contracted to sell the company's balance shareholding in the Pakistan PTA Limited comprising 92.4 million shares. That represented 6.1 per cent of the issued share capital of the PPTA and was to be sold to the ICI Omicron B.V, the parent company of the ICI Pakistan and the PPTA, at the same price of Rs10.50 per share, for an aggregate sale price of Rs969.8 million.

Now, the market value of share in the Pakistan PTA Limited being Rs14, most shareholders thought it was a bit strange that the block deal should have been struck at considerably lower price; many thought that the "strategic local holding" should have been disposed off at higher than market value of Rs14. Just how high, no one could say, but a 5 per cent premium over its par value appeared to them to be incredibly low.

For the ICI Pakistan, it possibly meant a gain of Rs3.50 a share, for including the right, its cost of acquisition came to around Rs7. The price of deal was also not too exciting for shareholders in the PPTA who let the stock drop by 40 paisas to close at Rs13.60, from the opening value of Rs14. A deal struck at a better price could have seen the stock edge up to Rs16, some investors thought.

The ICI Pakistan Limited also avoided disclosing the buyer. Market grapevine suggested that it could be a group that now has a major share in urea production, a competitive fibre manufacturer and a powerful stock broker - or all three combined. Just about 10 days ago, at the Extraordinary meeting on August 20, the management had told shareholders that some parties had expressed interest, but that there was no serious buyer at that point in time.