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Dutch firm keen to buy Engro Foods for estimated $510 million

By Salman Siddiqui
March 04, 2016

KARACHI: A Dutch dairy cooperative has expressed its interest in acquiring the majority shares in Engro Foods with an estimated investment of $510 million, analysts said on Thursday.

“We have received a public announcement of intention to acquire up to 51 percent of voting shares of Engro Foods (EFOODS) by Friesman Campina International Holding BV,” Andalib Alavi, company secretary at Engro Corporation said in a notice issued to the Pakistan Stock Exchange. 

The foreign company may shortly commence due diligence. 

“FrieslandCampina may acquire up to 391 million shares (51 percent of 766.6 million shares) of EFOODS, cumulatively through an agreement with the majority shareholders and a public offer,” it said.

“Moreover, the acquisition may be undertaken by the acquirer directly and/or through a special purpose company. The company has appointed Citi Global Markets Limited as financial advisors.” 

Currently, EFOODS has a free-float of 13 percent (99.7 million shares) with 87 percent (667 million shares), being held by Engro. 

Analyst Nabeel Khursheed at Topline Securities said if the Dutch dairy succeeds in acquiring the 51 percent holding in Engro Foods, “the Engro’s holding in its subsidiary is expected to be reduced to 36 percent (276 million shares).”

“At EFOODS’ current market price of Rs136.6, this translates into a deal size of Rs53.4 billion/$510 million and will result in the capital gain of Rs49.5 billion/ $473 million (Rs94.5/share) on ENGRO’s book. Cash flow gains will be Rs102/share,” Khursheed said. “We believe, Engro will utilise this to fund its investment in coal projects, which include Sindh Engro Coal Mining Company and Engro Powergen Thar (Private) Limited.”

Aijaz Siddique at KASB Securities said the divestment will allow Engro to maintain its total debt, provide ample cash to seed other capital intensive investments in the energy sector and maintain cash payout of 68 percent for 2015.

Tahir Abbas at Arif Habib Limited said the recent intention to acquire Engro Foods Limited also lies within the key aims of increasing share of value-added and branded products in the total sales volume.

Public announcement of the offer has to be made by the acquirer within 180 days of making the public announcement of intention to acquire voting shares or control of the company.  This however, can be extended by a maximum of 90 days by the Securities and Exchange Commission upon the request of the acquirer and after being satisfied that the request is reasonable.

FrieslandCampina is one of the world’s largest Dutch dairy co-operative with annual revenue of (approximately $12.4 billion) in 2013. The dairy company has more than 19,000 member dairy farmers in the Netherlands, Germany and Belgium. It has offices in 28 countries and employs a total of 21,186 people, supplying products in more than 100 countries worldwide.