The Supreme Court decision last week in favour of MCB has raised the chance for the first ever 'hostile take-over' in the corporate history of Pakistan.
In case there is no out-of-court settlement or any further legal hinges, Pakistan's one of the largest tycoons will also become the manager of Pakistan's largest insurance company, having a share of around 40 percent in the total non-life insurance premium.
Since the off-loading of Adamjee's shares by foreigners (in the post-nuclear scenario) and few of the sponsors in late 90s, Adamjee Insurance has been under various attempts of take-over.
As the availability of shares in the stock market was far higher than the holding in the hands of once-strong Adamjee family, many have attempted to take over the company but failed in the absence of any effective law.
Mansha Group with a diversified portfolio in the field of textiles, cement, and bank, started accumulating Adamjee's share after the local stock market settlement-driven crisis of May 2000.
The legal battle between Adamjee and Mansha Group started in 2002, when the High Court disallowed Mansha Group to participate in the voting in AGM. Later, the court also postponed the AGM in 2002.
Later in 2002, Take-over Law was enacted but we think that the recent ruling by the Supreme Court has not considered that law.
Mansha Group with 38 percent official holding in Adamjee and around 5-10 percent unofficial, according to market grapevine, has many options.
The take-over option is there where Mansha Group can easily put a majority (may be 5 out of 9) directors on Adamjee's Board either through more purchase of shares from the market or through proxies. It is estimated that the Adamjee Group has holding of less than 40 percent.
The other option is to have a friendly take-over with some sort of understanding with the target company.
Finally, Mansha Group can also sell its holdings to Adamjee, the chances of this happening is very slim looking at the Adamjee Group's financial muscles.
Since this decision, the local bourses there saw immense speculation in Adamjee's share amid hopes of further accumulation by the two groups coupled with chances of a proxy war.
Similarly, share price of MCB (that holds 29 percent of Adamjee) is also rallying as the holding of AGM may result in declaration of 15 percent final bonus for 2002 along with 2003 pay out, if announced.
SYMPATHETIC BUYING: There is sympathetic buying in other Mansha Group companies as there is cross-holdings in each other.
Finally, punters are betting on Engro that was locked in a similar row with Hussain Dawood Group. But we think that rally in Engro is not fully justified as the two groups have already reached a settlement.