The share purchase agreement for acquisition of a 52 per cent stake in Masood Textile Mills Limited, a listed company, by a Chinese firm — the Shandong Ryui Science and Technology Group Co. Ltd — has revived interest in mergers and acquisitions in the country’s corporate sector.

Both the buyer and the seller have kept the transaction price a well guarded secret. Yet, the stock price of Masood Textile has shot through the roof, from just around Rs55 a share on December 2 — when the ‘expression of interest’ was first announced — to its closing price of about Rs149 on Friday, or an incredible gain of 170 per cent in just a month and a half. Speculation is rife that the Chinese are paying a handsome price for the buy-out.

The last three years have witnessed rejuvenation in the country’s textile sector, which contributed 58 per cent to the country’s exports in FY13. Total exports clocked in at $13 billion, accounting for two per cent of global textile exports.

Dozens of listed textile mills that are deep in debt and unable to wipe out the red from their balance sheet have long since bled to death.

Yet, spinning mills have come back to life, as demand for yarn has received a boost in the last three years, mainly from China, the US and European markets. The GSP Plus status, which grants Pakistan’s textile exports a duty waiver in 28 European countries, is the icing on the cake.

Owners of scores of spinning mills that have remained idle for years are visiting the site and clearing up the cobwebs and tightening nuts and bolts to get the plants up and running — in the hope that Chinese buyers would find them potential targets for takeover as well. But even local conglomerates are expressing interest in acquisition of weak and sick spinning mills.

Some textile mills with tiny public holdings are going the food sector’s way: Why not buy back shares from minority shareholders and enjoy all the earnings going forward?

Resham Textile, Quality Textile and Liberty Textile have all announced repurchasing of their shares. But as stock prices of textile companies across the board have multiplied at least twofold in the last three months, small investors would not be at a loss in case of buybacks.

And M&A stories also abound in the cement sector, where demand has surged and peace amongst owners has given the sector pricing power. Market whispers of Lafarge Cement Company and Pioneer Cement being in talks on acquisition by big players are loud, but remain unconfirmed.

“For big cement companies, acquisition of an existing plant, as opposed to setting up a new one, makes sense,” the sponsor of a cement plant in the North told Dawn. He elaborated that the acquisition of a new Chinese cement plant would cost the buyer $150 enterprise value (ev) per tonne, while a European plant would cost $250 ev/tonne.

In contrast, a local plant of similar capacity could be acquired for, say around $50 ev/tonne, he said, and added that already existing lines of utilities, gas and electricity were other advantages.

Potential sellers of smaller cement companies are also trying to make the best as good times roll for the industry. Since competition and overcapacity continue to bite their market share, it all boils down to the survival of the fittest.

“The SBP’s decision to not hike the discount rate in the last monetary policy statement has given respite to highly leveraged cement and textile companies,” says Khurram Schehzad, head of equity sales at Arif Habib Corporation.

Apart from the textile and cement sectors, some smaller banks are also looking at prospects to merge into bigger banks, or combine their assets to form new banks.

But the most celebrated M&A in recent memory is when ICI Pakistan spun off its paint business in 2012 and vested it into another firm, Akzo Nobel Pakistan Ltd, a separately listed entity. It was, however, in line with the worldwide acquisition of ICI by Akzo Nobel.

Next, ICI Pakistan saw a transition in its ownership of majority holding, also in 2012, when the Yunus Brothers Group — sponsors of the country’s largest cement plant, Lucky Cement, wrote a fat cheque of Rs14.4 billion for a 75.8 per cent stake in the company.