FCCL announces merger with Askari Cement Limited

KARACHI: Fauji Cement Company Limited has informed stakeholders of a board approval for a scheme of amalgamation with Askari Cement Limited (ACL).

Post expansion, FCCL would become the third largest cement company in the country behind Bestway and Lucky Cement, according to Pak Kuwait Investment Company Head of Research Samiullah Tariq.

According to a notification on Pakistan Stock Exchange (PSX), FCCL announced that its directors in their meeting have approved a ‘Scheme of Arrangement’ for the amalgamation of ACL with and into FCCL and its placement before the shareholders in the extraordinary general meeting of the company.

The entire ACL undertaking together with all its properties, assets, rights, trademarks, patents, liabilities and obligations would be transferred to and would be invested in FCCL.

The share swap ratio has been determined as 5:1 (5 shares of FCCL for every 1 share held in ACL). ACL would be dissolved without winding up.

“Further announcements in this regard will be made in due course of time including the convening of an extraordinary general meeting to seek shareholder approval of the scheme,” the company said.

“Shareholders will give the final nod in an AGM, as per Companies Act 2017,” read an Arif Habib Limited note on the FCCL announcement. “This merger will transfer all of ACL's properties, assets, and liabilities to FCCL. In return, the shareholders of ACL will be awarded a holding in FCCL under a share swap scheme of 5:1.”

While FCCL has an outstanding capital of 1,379.815 million shares, as per two year old accounts of Askari Cement, the company has issued 160 million shares to its existing owners.

Under the stated swap agreement, ACL shareholders would be issued 800.493 million new shares of FCCL.

“Post-merger, FCCL's share capital will go up to 2,180.309 million shares. This however, should not be worrying,” said AHL.

Askari has an annual capacity of 2.80 million tonnes against FCCL's current capacity of 3.43 million tonnes. This implies an 82 percent addition to current capacity, which, together with FCCL's announced green-field expansion of 2.05 million tonnes up north (DG Khan, Punjab) and ACL's brown-field expansion of 2 million tonnes, would render FCCL to become the third largest player in the country with a capacity of 10.3 million tonnes.

Post-merger and expansion, ACL would add 47 percent to the total capacity (4.9 million tonnes out of the total 10.3 million tonnes) in the new entity, whereas its current owners would hold nearly 37 percent in shareholding (800 million shares out of 2,180 million shares).

“This deal will be beneficial for both ACL and FCCL, as the company's cumulative market share will aid its augmented presence in north (third largest capacity in the region after BWCL expands by 2.16 million tonnes to 12 million tonnes and Lucky expands by 3.15 million tonnes to 15 million tonnes),” said the AHL note.

It added that FCCL's book value would go up from Rs17.85/share to Rs21.78/share, based on the latest available financials (Q1FY21 for FCCL and FY20 for ACL).