KARACHI, Jan 18: Two of the top foreign pharmaceutical companies in Pakistan — Abbott Laboratories Limited and Knoll Pharmaceutical Limited — decided at separate board meetings on Thursday, to merge the two businesses in the country.
The ‘Scheme of Arrangement’ provides that the whole of the undertaking of Knoll would be transferred to Abbott; that the shareholders in Knoll would be allotted 8 shares in Abbott for every 10 shares held in Knoll and that the latter company would be wound up without dissolution.
The news was greeted at the market with mixed reaction. While the Abbott stock stood unchanged at Rs71 on Friday, the share in Knoll plunged by Rs4.05 to Rs66.20; the shareholders in the latter company, possibly disappointed with the swap ratio. Abbott would eventually get to explain why 10 of Knoll shares would get to be exchanged for only 8 in Abbott, but investors have since long, watched market prices of both stocks running neck-and-neck.
Total outstanding shares in Knoll are 23.0 million and in Abbott slightly more at 24.5 million.
The last full year (2000) profit at Abbott stood at Rs179 million, representing earning per share at Rs7.30; the company having declared cash dividend at 40 per cent for 2000, producing a dividend yield of 2.2 per cent. Knoll’s last full year profit stood at Rs117 million, which translated into earning per share of Rs5.10; the company paying out cash dividend at 50 per cent for 2000.
Nearly 87 per cent shares in Abbott Pakistan are currently held by Abbot Laboratories Inc, USA, while Abbott Equity Holding Limited, UK, which is a wholly owned subsidiary of Abbott Laboratories Inc, USA already has 66 per cent stake in Knoll Pakistan— directly or indirectly, through its nominee directors.
The first indications that amalgamation of the two companies in Pakistan was on cards, had come as early as last summer.
Abbott Pakistan’s chairman & MD, Kamran.Y.Mirza had told shareholders at the AGM on May 17 that in December 2000, Abbott Laboratories Inc, USA had announced that it had concluded an agreement with BASF to purchase BASF’s Pharmaceutical Division worldwide.
“In Pakistan BASF’s pharmaceutical Division operates as Knoll Pharmaceutical, which is a publicly listed company,” the Abbott Pakistan chairman had said. “In the light of Pakistani Law, Abbott Pakistan is evaluating options to ascertain what would be the best way to proceed with integration/merger of the two companies in Pakistan.”
The scheme of merger approved by the Board of Directors of the two companies on Thursday, is, of course, subject to the sanction of the Sindh High Court, the approval of the regulators and the endorsement by the shareholders of the two companies.
By virtue of the agreement, the Authorized capital of Abbott would be raised to Rs500 million, by the creation of a further 20 million ordinary shares of Rs10 each.
The allotment of shares in Abbott would be made within 30 days from the ‘record date’, which has been defined as “the date to be fixed by the directors of Abbott after completion date to determine the identities and entitlements of Knoll qualifying shareholders.”
The scheme mentions that it shall become operative as soon as a certified copy of an order of the court under section 284 of the Companies Ordinance, 1984 sanctioning the scheme shall have been filed with the registrar of companies, Karachi.
“Unless this scheme shall have become effective as aforesaid on or before December 31, 2002 or such later date if any as the Court may allow, the same shall not become effective,” the scheme stated in its concluding clause.