KARACHI: In a significant development for the fertiliser sector, Fauji Fertilizer Bin Qasim Limited (FFBL) and Fauji Fertilizer Company Limited (FFC) have officially approved their merger, the companies announced on Friday. The decisions were made during separate board meetings held on September 20, 2024.
The merger plan, along with the scheme of arrangement, was submitted to the Pakistan Stock Exchange (PSX) following the meetings.Under the terms of the merger, FFBL’s entire undertaking, including its liabilities, privileges, rights and business operations, will be integrated into FFC. A key feature of the agreement is the approved swap ratio, which will allow shareholders to receive 4.29 shares of FFBL for every one share of FFC. This will result in the cancellation of all FFBL shares and the issuance of 150.897 million ordinary shares of FFC to FFBL shareholders.
According to Muhammad Iqbal Jawaid, an analyst at Arif Habib Ltd., the book value of the combined entity is expected to stand at Rs132.84 per share. FFBL currently has 1,291 million outstanding shares, while FFC has 1,272 million. Notably, FFC already holds a 49.9 per cent stake in FFBL.
In terms of capacity, the merger is set to create a major player in Pakistan’s fertiliser market. FFC, with an annual capacity of 2.04 million tonnes of urea, will be bolstered by FFBL’s urea capacity of 0.55 million tonnes and DAP (diammonium phosphate) capacity of 0.65 million tonnes. The combined entity will have a total urea production capacity of 2.60 million tonnes and maintain its DAP capacity at 0.65 million tonnes.
Post-merger, the new entity is projected to dominate the local urea and DAP markets with a market share of approximately 43 per cent and 60 per cent, respectively.Areeba Nasir, an analyst at Optimus Capital Management, highlighted the strategic benefits of the merger, noting that it is expected to optimize costs for FFC, eliminate double taxation and lead to significant synergies. The merger will also enable FFC to save taxes on FFBL’s dividends and expand its holdings in key sectors, including power, by making Fauji Power Company Limited (FPCL) a subsidiary. Askari Bank will also become a subsidiary under the newly formed entity.This horizontal merger is poised to transform FFC into the largest urea producer and the sole DAP manufacturer in the country, further strengthening its leadership position in the market.