KARACHI, July 2: Three companies of the Johnson & Phillips group have entered into a "Scheme of Arrangement" for merger into Johnson & Phillips (Pakistan) Limited.

The 'surviving company' on the conclusion of deal would be 'Elmetec Johnson & Phillips (Pakistan) Limited.

Only one out of the four concerned entities--Johnson & Phillips (Pakistan) Limited -- is listed on the Karachi Stock Exchange with paid-up capital at Rs54.5 million.

The market price of the 10-rupee share in the listed company is almost at par with its paid-up value.

Between Jan-May 2011, turnover of 62,509 shares was noted in the scrip.

The Scheme of Arrangement taking place under Sections 284, 285, 286, 287 and 288 of the Companies Ordinance, 1984, stipulates that the entire undertaking, comprising all assets liabilities and obligations of the merging entities (Johnson & Phillips Industries (Pakistan) Limited; Johnson & Phillips Emco Pakistan (Pvt) Ltd and Elmetec (Pvt) Ltd), would stand transferred to Johnson & Phillips (Pakistan) Limited.

The merging entities would be dissolved without winding up.

On the basis of Swap Ratio agreed between the parties, J&P (Pak) Ltd shall issue agreed transferable shares to the shareholders of the merging entities in consideration of the above 'immediately and simultaneously' on the effective date, subject to encumbrances and charges existing in respect of the agreed transferable shares.

Officials of the listed company told the shareholders that the merger would lead to an increased asset base and the size of the entity.

“This would in turn assist the management to have access to more external funds at competitive rates," they said, adding that the larger size of equity would provide greater comfort to potential creditors.

Access to larger resources would, in turn improve growth prospects and ability to undertake large assignments.

Other benefits of merger were stated to be economies of scales (synergies); increase in risk absorption capacity; reduction in administrative costs; single corporate and tax reporting requirement.

Shares in J&P (Pak) Ltd would be issued, based on the agreed Swap ratio between the parties to the scheme of arrangement.

Following the close of transaction, the name of Johnson & Phillips (Pakistan) Limited would change to "Elmetec Johnson & Phillips (Pakistan) Limited" (the surviving company).

Regarding the swap ratio, it was notified that J&P (Pak) Limited would issue at par and allot 22.06 shares of face value of Rs10 to every member of Elmetec (Pvt) Ltd for every one share of face value of Rs100 held by the member on effective date or at such date as may be ordered by the court. That in terms of the Swap Ratio determined by the Board of Directors and agreed by the merging entities and J&P (Pakistan) Ltd, no shares would be issued to the shareholders of J&P Industries (Pakistan) Ltd and J&P Emco Pakistan (Pvt) Ltd.

Upon issuance of the agreed transferable shares to the stockholders in Elmetec (Pvt) Ltd, the paid-up capital of J&P (Pakistan) Ltd would escalate to Rs187 million, divided into 18.7 million shares of face value of Rs10 each.