Shell Pakistan’s share price has soared over 24% in 3 days after parent company’s intent to sell

Shell Pakistan Limited’s (SPL) share price has surged over 24% in the last three trading sessions, a rise triggered by its announcement on Wednesday that Shell Petroleum Company Limited (SPCo) intends to sell its shareholding in SPL.

From Rs82.95 to Rs103.05 on Friday, the price has surged 24.23%, hitting upper locks (the maximum increase allowed by the stock exchange on any particular day) on all three trading sessions along the way.

While the announcement did not disclose the amount of shareholding SPCo intends to sell – it had a 77.42% stake in SPL as of December 31, 2022 (a little over 165.7 million shares), according to the annual report for that year – a company statement did convey that the oil giant is “seeing strong interest from international buyers”.

Business Recorder reached out to market analysts to understand the share-price movement, which has come contrary to the key benchmark KSE-100 Index that has retreated less than 0.6% in the short period.

Shell Petroleum Company intends to sell its stake in Shell Pakistan

“Investors believe the company will recover its enterprise value during sale, and the valuation of its land and assets is lofty,” Pak-Kuwait Investment Company Head of Research Samiullah Tariq told Business Recorder.

“There is general perception that it will be sold at an extremely high price. Moreover, substantial activity is being seen by the takeover lot at the PSX.”

Takeover lot are investors that pour money in businesses that are undergoing acquisitions to profit from the sale.

“Now, a tender offer is expected which is giving an incentive to PSX participants,” Tariq said.

Ismail Iqbal Securities Head of Research Fahad Rauf told Business Recorder that there is general perception that the PSX is under-valued.

“The economy is undergoing a difficult time so investor interest is rising in Shell.

“Investors believe the acquisition will be done on fair market value and they expect that to be far higher than the current market price.

“This is why the share price has been climbing rapidly,” he said.

Shell Pakistan posts massive loss of Rs4.8bn in Jan-Mar quarter

Alpha Beta Core CEO Khurram Schehzad told Business Recorder investors of PSX expect the buyer of Shell to pay an “excellent price during the purchase”.

“Public offer is expected to be much better than market value,” he said.

Announcement on Wednesday

On Wednesday, SPL announced that SPCo has notified the intent to sell its shareholding in the company.

The development was shared by SPL in a notice to the PSX.

“We hereby inform you that the Board of Directors of Shell Pakistan Limited (SPL), in a meeting of its Board held on June 14, 2023, have been notified by The Shell Petroleum Company Limited (SPCo) of its intent to sell its shareholding in SPL,” read the notice.

It added that any sale will be subject to a targeted sales process, the execution of binding documentation and the receipt of applicable regulatory approvals.

SPL is a subsidiary of SPCo, London (immediate holding Company), which is a subsidiary of Shell Plc. [formerly known as Royal Dutch Shell Plc] (ultimate holding Company) incorporated in the United Kingdom, says information provided in the 2022 Annual Report.