The Searle Company to raise Rs4.25bn through rights issue

The Searle Company Limited (SEARL) said on Thursday it will raise Rs4.25 billion through a rights issue of 121.4 million shares at a price of Rs35 per share.

The company, in its notice to the Pakistan Stock Exchange (PSX), said that it will issue 121,428,571 ordinary shares at a price of Rs35 per share, (i.e. inclusive of a premium of Rs25 per share) aggregating to Rs 4,249,999,985.

“The quantum of the right issue is approximately 31.1302746% of the existing paid-up capital of the company i.e. approximately 31.1302746 right shares for every 100 ordinary shares held by the shareholders of the company,” stated the notice.

The company said that the funds will be utilised to expand the company’s portfolio by enabling it to invest in, by acquiring shares of, an associated company i.e. Searle IV Solutions (Private) Limited, as well as to reduce current debt levels and favourably improve its capital structure, and, consequentially, improve its profitability and financial ratios.

The principal activity of the company is the manufacturing and sale of pharmaceutical, consumer health and nutritional products. International Brands (Private) Limited is the parent company, which holds 56.32% shareholding in the company.

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The company said the issue is being carried out at a price which is less than the current share price in the market and hence there is no major investment risk associated with the right issue.

“Normal risks associated with the business will remain; however, the company believes that it is well placed in the market with a proven track record, which will help to mitigate such risk factors,” it said.

The right issue is being carried out at a premium. “Considering the current market price of the company, the premium charged over the par value is justified and is in line with market practice, in fact the same constitutes a 34.14% discount on the last 3 months average trading share price,” Searle said.

At the time of filing, the shares of SEARL were being traded at Rs46.32, down by Rs1.72 or 3.58%.