Audiences are used to the news of corruption, security lapses, corporate misgivings and the list goes on. Even a single piece of positive information receives a lot more attention and becomes more significant for its symbolic value, in times where the general direction of news flow is negative.
Last week saw the sealing of a formal agreement between Pakistan Cables (PCL) and General Cables (BGC:NYSE), whereby the foreign company will acquire nearly a 25 percent stake in the domestic company.
General Cables is a Fortune 500 Company with operations in nearly hundred countries and manufacturing facilities in 30 countries.
Pakistan Cables Limited is a manufacturer of wires and cable, copper rods and PVC. It has been listed on the KSE since 1955.
At the time of its establishment, the company was in partnership with the BICC UK, the largest cable company in the world. The BICC subsequently divested its stake in the PCL and was acquired by General Cables in 1999.
"The company has come a full circle with General Cables now investing in Pakistan Cable,\ said the CEO Kamal Chinoy, at the signing ceremony.
Being in the mature industry of cable and wires, the company has a strong history of paying dividends to its shareholders.
The deal is structured such that the PCL will issue additional equity in favour of General Cable at a rate of $1 per share for an expected $7 million.
Given the average closing price of PCL at the KSE year to date is Rs52/share, the transaction price means a premium of just over 65 percent at the current dollar rupee parity levels.
"As a contrarian company, we believe you have to go where you are thinking long term," said Gregory B. Kenney, CEO General Cables Ltd.
Technology transfers, enhanced product offerings and improvements in corporate governance are expected to be non-cash benefits of the deal for Pakistan Cables.
Deal execution may still take a few weeks. Though regulatory approval from the SECP has been acquired, a few more approvals are in the process.
It may not seem like a hefty investment, but the $7 million is symbolic of investor confidence in companies that are well managed and can compete on a global level.