Foreign divestment expected to earn TRG Pakistan $142.3 million

KARACHI: Business process outsourcing company TRG Pakistan is expected to get $142.3 million from selling down stake in a US-based digital insurance agency E-Telequote, an analyst said on Tuesday.

Primerica Inc, a Delaware Corporation entered into a share purchase agreement with E-Telequote Limited to acquire 80 percent of its shareholding. The remaining 20 percent stake will be acquired by Primerica over next four years. The deal is expected after July.

TRGIL in which TRG Pakistan owns 45 percent is selling its full stake of 70.25 percent in the target company followed by 9.75 percent stake by management of E-Telequote. Implied Equity value of E-Telequote in this transaction is expected to be $450 million, adjusted for net debt of $150 million. The selling parties (TRGIL and management of E-Telequote) will get $345 million cash (and remaining $15 in subordinated note) which is 80 percent of total equity value of $450 million.

“TRGIL will receive cash of $316.125 million from this transaction. Given 45 percent stake of TRG Pakistan in TRGIL, the impact on TRG will be $142.25 million or Rs21.6 billion (Rs40/share),” Shankar Talreja, an analyst at Topline Securities said in a report.

The purchase agreement also includes the potential for contingent consideration of up to $50 million to be paid by acquirer to selling parties in the form of earnout payments of up to $25 million in each of 2022 and 2023 subject to meeting certain conditions. These conditions include achieving forecasted earnings before interest, tax, depreciation and amortization by the E-Telequote.

The management of TRG is also considering means other than listing to divest their holding in E-Telequote, Talreja said, citing a company’s official.

In last assets monetization of Affiniti and IBEX, the cashflows were not routed to TRG Pakistan, however TRGIL used those proceeds to retire its debt. A meagre amount of $15 million was routed to Pakistan.

Currently, TRGIL has outstanding debt of $50 million. Adjusting for that debt, TRGIL will have free cash flows of $266 million. This can be used for either reinvestment or payout.

If TRGIL consider to pays this to shareholder then TRG Pakistan can get dividend of $120 million (Rs18 billion), translating into per share dividend of Rs33.4.

The purchase agreement may be terminated under certain customary and limited circumstances at any time prior to the effective time (as defined in the purchase agreement), including by mutual written consent or if the acquisition has not been consummated on or prior to October 1, 2021.