Shell Pakistan Ltd (SPL) has announced that UK-based Prax Overseas Holdings Ltd intends to purchase its 77.42% shares currently held by the foreign sponsor. Prax Overseas Holdings Ltd is a British investment firm with all its shares owned by fuel supplier State Oil Ltd.
SPL is an energy conglomerate with operations in the up-, mid-, and downstream segments. In the downstream segment, it operates under the brand name Harvest Energy, which is the part of the local value chain where SPL operates.
Earlier in June, SPL had informed investors that its foreign sponsor intended to divest its entire 77.42% stake in the oil marketing company (OMC) as part of its strategy to “simplify” its global portfolio. Shell Petroleum Company Ltd, a subsidiary of Shell plc, is currently the largest shareholder in SPL. The general public owns 15.2% of shares, with the remainder controlled by public-sector companies, banks, mutual funds, etc.
Takeover regulations require that any share purchase agreement with a majority shareholder must be followed by a public offer to allow small investors to participate in the deal. Therefore, the second phase of the acquisition will involve a public offer for half of the remaining shareholding in SPL currently held by minority investors. The potential acquirer will make a public offer for an 11.29% shareholding in the target company at an equal or higher share price than the one quoted to the foreign sponsor for its majority stake.
At the current market rate of Rs161.27 per share, the value of the foreign sponsor’s entire shareholding in the OMC is approximately Rs26.7 billion. The sale of the sponsor’s shareholding in SPL will include its downstream business as well as a 26% stake in Pak-Arab Pipeline Company Ltd.
In July, Pakistan Refinery Ltd and Air Link Communication Ltd also expressed their interest in jointly buying the majority shares of SPL. More recently, Bloomberg News reported that Saudi Aramco, the world’s largest oil company, is exploring the possibility of making a bid for SPL.
SPL reported a net profit of Rs3.5 billion for the January-June period, which is down 52.8% from the previous year. The decline in profit is attributed to “significant external disruptions, including an unprecedented devaluation of the rupee, rising inflation, and prevailing macroeconomic uncertainty.”