Engro Corp (ENGRO) has received a public announcement of intention to acquire up to 51% of ENGRO’s shareholding in Engro Foods Limited (EFOODS), amounting to ~340mn shares, by FrieslandCampina International Holding BV, a Dutch dairy cooperative.
ENGRO currently has a 667mn shares stake in EFOODS. Due diligence with regards to the share purchase is expected to commence shortly. The impact of the transaction will be material on ENGRO, resulting in a cash inflow of approx PKR57bn (at an assumed strike price of PKR154/sh) coupled with a gain of approx PKR93/sh.
We believe the gain will be recognized in the consolidated books given loss of ENGRO’s control over EFOODS post execution of the transaction. Post sell-off, the effective shareholding of ENGRO will reduce to 327mn shares (43% of the total shares).
Proceeds generated through selling may potentially be deployed in expansion of Sindh Engro Coal Mining Company (SECMC) and Engro Powergen Thar.
If this deal is materialized, it will be the largest ever deal in the private sector history of Pakistan.
Pakistan is already in the radar range of the world corporate sector and this deal will further lift its image.
Note: FrieslandCampina is the world’s largest dairy cooperative and one of the top 5 dairy companies in the world.