Consolidation planned

KARACHI: Engro Corporation Limited on Wednesday said its board of directors has decided to sell Corp’s entire shareholding in its wholly owned subsidiary, Engro Eximp (Private) Limited (Eximp) including Eximp’s 100 percent held UAE based subsidiary Engro Eximp FZE to an associated entity, Engro Fertilizers Limited (Efert) for a consideration of Rs4.4 billion, based on an independent third party valuation.
Eximp is the group’s commodity trading business that deals primarily in the import and trading of phosphate-based fertilisers for Efert and also imports micro-nutrients like Zinc Sulphate, which it supplies as raw materials to Efert’s Zarkhez plant for manufacturing blended fertilisers.
Currently, Eximp imports phosphates based fertilisers, which are distributed and marketed through Efert’s network as an extension of Engro’s overall fertiliser portfolio.
The statement said in order to further strengthen synergies between the company’s business lines, the board plans to consolidate the fertiliser business into one entity which will in turn allow Efert to consolidate its own position in the fertiliser industry.
“ECorp will also be purchasing the entire issued share capital of Engro Eximp Agriproducts Limited (EEAP), a wholly owned subsidiary of Eximp, from Eximp for a consideration of Rs4.4 billion, to make it a direct subsidiary of the company,” the statement said.
EEAP is a wholly owned subsidiary of Eximp engaged in the procurement, processing and sale of Basmati rice and owns the largest integrated rice processing plant in the country. The corporation has also planned to subscribe to Rs2.2476 billion worth of preference shares to be issued by its subsidiary, Engro Polymer and Chemicals Limited.
The preference shares will carry a dividend of 14 percent/annum.
“Due to various legal and regulatory approvals required in issuing preference shares and as a precaution against any problems that may arise in their issuance, the company is also seeking approvals to lend to EPolymer a sum of up to Rs4.0 billion as a long-term subordinated loan,” the statement said.
It added that the preference shares will be cumulative, non-redeemable and non-participatory, non-convertible and the company will have a call option upon expiry of the 3rd anniversary of their issue to buy them back at par value.
“It is, however, not the intention to invest more than a maximum of Rs4.0 billion by way of a combination of the preference shares investment and loans,’ the statement said. “The issue of preference shares will serve as financial support enabling EPolymer to strengthen its balance sheet.”