After a 32-year stretch on the local bourses, Unilever Overseas Holding, the London based parent company of Unilever Pakistan, has announced a share buy-back programme that will delist the consumer goods giant from all three stock exchanges in the country.
"This offer is, of course, subject to acceptance by the Karachi, Lahore and Islamabad Stock Exchanges and will be processed in accordance with the procedures prescribed by them in their respective listing regulations," says a letter from the companys foreign parent addressed to the local stock exchanges.
Following acceptance, the firm will have 60 days to buy back its stock from holders, and if successful, shall stand de-listed after 32 years of being listed on KSE, with its IPO having taken place in Karachi in December 1980.
Hailed positively by a majority of commentators, the move is reportedly part of plans for the global giants strategy for Pakistan and is, in effect, a strategy through which the company will increase its investment in the country.
The offering - at Rs 9,700 per share - should bring the total transaction to Rs 31.8 billion, which is expected to ode well in terms of increase in capital inflow into the country acknowledges a research note from a leading investment bank. Moreover, the inflow of funds amounting upwards of 335 million dollars is also expected to act as a salve to the depressing BoP situation in the country.
Furthermore, given the limited number of opportunities in the FMCG sector, Unilevers voluntary delisting is very likely to move up the prices for other scrips in the sector, most notably affecting Engro Foods valuation.
In fact, Engro Foods is expected to be one of the biggest beneficiaries of this move; as of Friday the companys shares had reportedly rallied by 7.8 percent since Unilevers announcement of its plans. A research report prepared by AKD Securities notes that with an average daily traded value of Rs 214 million, Engro is the most liquid stock in the sector, hence prices are very likely to jump as its shares become more valuable in a sector where illiquidity reigns supreme.
On the whole, the buyback has revived investor interest in the companys stocks, which have historically been largely illiquid. However the general consensus amongst stakeholders as of now is that the offering price, at Rs 9,700 per share, is on the lower side.
When asked if this may cause the companys buy-back efforts to fail, Raza Hamdani, an analyst from Shajar Research pointed out that in comparison to Unilevers direct competitors Nestle, the offered price is indeed lower than expected, however the share buyback is very likely to go through as Unilever is as motivated a buyer as any.
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