LAHORE – The Fauji Fertilizer Company Limited’s plan of acquisition Askari Bank (AKBL) is almost final as FFC, in its board of directors’ meeting scheduled to be held on Friday (today), will discuss and approve the business plan for 2013 including Askari Bank (AKBL) acquisition.
Financial market experts from AHL stated that Army Welfare Trust (AWT) desires to finalise deal of its entire stake on mutually agreed price of around Rs10 billion, which turns out to be Rs24.32 per share. However, the deal is expected to be struck around Rs24/share, they added.
As notified earlier to the KSE, FFC showed its intention to acquire AKBL, diversifying its portfolio from agri-focused investments to commercial banking. The BoDs of the company, in this regard, are expected to discuss in its business plan 2013 the mentioned banking acquisition through building consensus along with final price for foresaid transaction, the AHL analysts said in a note. The major stakeholder of AKBL is Army Welfare Trust (AWT), which holds 411.17 million shares (50.57 per cent) controlling stake. FFC is expected to acquire the entire AWT shareholding (50.57 per cent) in the bank. More, the company is expected to offer a tender to the general public.
The analysts estimate that the FFC will post a profit after tax of Rs7039 million for the 4QCY12, up 103 per cent QoQ, translating into full-year earnings of Rs16.40/share, down 7.4 per cent YoY based extrapolated sales volumes for Dec-12.
Along with that, they estimated company’s free cash flows to accumulate around Rs10 billion by the end of the year.
Hence, the company would need Rs7.3 billion to acquire AWT stake in Askari Bank. Keeping last cash balance of Rs8.3 billion at company balance sheet in perspective, along with estimated free cash-flow generation of Rs3.83 billion. Thus, the company may need to either finance through borrowings the remaining amount of Rs3.4 billion or cut dividends in half or issue 25 per cent bonus to fund the transaction at the stated price. It is believed the deal can easily be done by a leveraged-buyout option as FFC already holds bank financing lines of Rs12b. With falling interest rates, it seems more feasible for FFC to opt for financing option and maintain their historical dividend payout stream of 90-95 per cent for full-year CY12.