KARACHI, Dec 13: Pakarab Fertilisers on Thursday fought back on the Dawood Hercules Corporation (DHCL) decision to walk out of the sale deal of Dawood Fertilisers.

On Tuesday the board of directors of DHCL had announced that the company was pulling out of a possible sale deal of Dawood Hercules Fertilisers to Pakarab Fertiliser (Pakarab). A memorandum of understanding (MoU) was executed between DHCL and Pakarab in respect of a possible sale of DHCL’s entire shareholding of 100 million shares in DH Fertilisers to Pakarab.

The DHCL in its statement had argued on Tuesday that “the consummation of the Transaction under the MoU was subject to entering into definitive agreements and under the MoU the parties made no binding agreement in relation to the transaction".

DHCL had further claimed that until Tuesday, no definitive agreement was entered into, which was why the Board of DHCL in its meeting held on Monday, decided that the company "did not wish to pursue the Transaction for commercial reasons".

The DHCL directors also said that the company had informed Pakarab of its intention to discontinue the negotiations in relation to the transaction.

On Thursday, Pakarab fought back claiming that the DHCL decision to back out of transaction was in violation of the MoU. A letter sent by the Secretary Pakarab to the stock exchanges stated that the company was "surprised" to read the DHCL letter on KSE website, "considering that DHCL has still not directly communicated this decision to us".

Second, Pakarab stated that it was equally surprised on account of the fact that the MoU between the parties was to expire on Dec 15, and in terms of clause 8, the MoU could only have been terminated with the mutual consent of the parties or upon execution of a binding Share Purchase Agreement, prior to the expiration date.

“It is thus inexplicable that DHCL has chosen to issue the letter dated Dec 11, which is in complete violation of the MOU,” Pakarab stated and concluded its communiqué with the words: "In the light of the aforesaid and otherwise, Pakarab reserves all rights to pursue appropriate action against DHCL".

Pakarab Fertiliser is a joint venture between Arif Habib Group and the Fatima Group, each holding one-half of the equity.

Sources said that Arif Habib had rushed to Lahore on Thursday to find out for himself the facts of the case. A source privy to the matter said that late in the evening on Saturday last, the two parties were on the same page in respect of the transaction of sale of shares of Dawood Hercules to Pakarab. What could have made DHCL change its mind over-night and pull out of the deal is yet shrouded in mystery.

An analyst said that the fertiliser business was embroiled in numerous problems. It suffered line losses and lack of planning on the part of the government mainly on the gas issue which was a perpetual headache for urea producing companies.

Yet earlier this week, the fertiliser industry saw a ray of hope as gas supplies to four plants on the SNGPL network: Pakarab Fertilisers, Dawood Hercules, Agritech and Engro Fertilisers looked like on track of resolution. “It has suddenly started to look like the fertiliser production can become economically viable in future,” said the analyst.

Yet the version of the Dawood Hercules Corporation might be communicated to the stock exchange in the next few days. Investors are watching the developments with interest since the failure to find amicable solution to the dispute could lead the parties finally to knock at the doors of the Courts.