FCCL approves merger with ACL
KARACHI: Fauji Cement Company Limited (FCCL), in its latest advisory on the Pakistan Stock Exchange (PSX), informed stakeholders of the Board’s approval of a proposed merger with Askari Cement Limited (ACL ).
Although shareholders will give the green light at an AGM, in accordance with the Companies Act 2017, this merger will transfer all of ACL’s properties, assets and liabilities to FCCL. In return, ACL shareholders will be granted a stake in FCCL under a 5: 1 share exchange program.
While FCCL has an outstanding capital of 1,379.815 million shares, according to Askari Cement’s two-year-old accounts, the company has issued 160 million shares to its existing owners. Under the indicated swap agreement, ACL shareholders will receive 800.493 million new FCCL shares. After the merger, the share capital of FCCL will increase to 2,180,309 million shares. This shouldn’t be of concern, however, said Misha Zahid at Arif Habib Limited.
The hierarchical order of cement
Relevantly, Askari Cement Limited has an annual capacity of 2.80 million tonnes compared to FCCL’s current capacity of 3.43 million tonnes. This implies an 82% increase in current capacity, which together with the announced expansion of FCCL of 2.05 million tonnes in the North (DG Khan, Punjab) and the expansion of 2 million tonnes of ACL , will make FCCL the third player in the country with a capacity of 10.3 million tonnes.
After the merger and expansion, ACL will add 47% to the total capacity (4.9 million tonnes out of a total of 10.3 million tonnes) of the new entity, while its current owners will hold nearly 37% of the shares (800 million shares out of 2,180 million shares). While this deal is beneficial to both ACL and FCCL, as the company’s combined market share will contribute to its increased presence in the North (third largest capacity in the region after BWCL increases by 2.16 million tonnes to 12 million tons and LUCK increases from 3.15 million tons to 15 million tons).
On the financial side, the book value of FCCL will increase from Rs 17.85 / share to Rs 21.78 / share, based on the latest financial data available (first quarter of fiscal year 21 for FCCL and fiscal year 20 for ACL) . Please check Exhibit 1. “Although we expected a slight dilution of profits of about 2%, please check Exhibit 2.”
Copyright Business Recorder, 2021