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Mettis Global News
Mettis Global News

MPS Preview: High for Longer

15.3% shareholders reject unfair offer by PSMC, standing against unjust delisting

Pak Suzuki hit by cyber-attack
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January 30, 2024 (MLN): Owners representing 15.39% of the total shareholding of Pak Suzuki Motor Company Limited (PSMCL) collectively reject the delisting of the company and the purchase price of Rs. 609/- per share. Hence, they will not be selling their shares to the sponsors of PSMC.

In a letter written to MD PSX, Commissioner Securities and Exchange Commission of Pakistan (SECP), CEO of PSMC and Chairman Voluntary Delisting Committee (VDC), the shareholders drew attention to clause 5.14.5 (a) of the Rule Book of PSX, which mandates that when the sponsors' shareholding is below 90%, they are obligated to increase their shareholding to at least 90% of the total shares to qualify for delisting.

As a result of their rejection, it is a foregone conclusion that the maximum shareholding the sponsors of PSMCL will be able to reach is 84.6%, which is much below the threshold to qualify for delisting. Therefore, the entire exercise will be pointless and futile.

“As shareholders jointly holding more than 15.39 % of the company's shares and collectively representing 57.2% of the total shareholding held by the general public (i.e. approximately 27 % shareholding), we formally reject both the delisting proposal and the minimum purchase price determined by the VDC of PSX and accepted the board of directors of PSMC,” the letter reads.

Their rejection is based on the strong concerns regarding the oppressive and unlawful manner that PSMCL has been run over the past few years, resulting in siphoning of billions of rupees from the company.

This proposed delisting and that too at an artificially low price seems to be an attempt on part of the management/holding company to escape accountability and take advantage of their wrongdoing at the cost of the minority shareholders.

The intrinsic value fails to accurately reflect the true financial standing of the company, PSMC's utilization of transfer pricing, discounts, commission, royalty and technical fee etc. has led to a significant portion of profits being diverted to its holding company, resulting in frequently reported slender profit margins or abnormal losses.

 “Our stance is further strengthened by the significant improvement in the company's financial performance following the change of auditors, indicating discrepancies in the earlier reported losses,” it added.

Despite repeated requests, the adjusted EPS, crucial for a comprehensive understanding, has not been party transactions with the holding company over the past five years.

Considering the latest EPS of Rs 45/share. (in the quarterly financial statement for the quarter ending September 30, 2023, and the PE multiples historically used for delisting multinational corporations (MNCs) in Pakistan, the price determined by the VDC is disproportionately lower and fails to reflect the fair value of the company, the letter highlighted.

Despite numerous requests, access to the company's five-year business plan along with delisting files and annexures, essential for assessing prospects and value, has been denied.

Thus, the shareholders urged the PSMCL to refrain from convening the Extraordinary General Meeting (EOGM) scheduled for February 09, 2024 to vote on the voluntary proposed delisting, and request the management/sponsors to take appropriate actions to redress the concerns raised by the undersigned.

If, despite the aforementioned intimation that the delisting will fail, any further steps are taken for the voluntary delisting by PSMCL, its management and sponsors, these will be clearly in bad faith and for ulterior motives and shall be entirely at their own risk and cost.

They also urged PSX as the primary regulator and SECP as the apex regulator to fulfil their statutory duties and responsibilities and, inter alia, protect the interests of the minority shareholders and take appropriate actions to address the issues highlighted.

“In any case, and without prejudice to the foregoing requests, we reserve our rights to pursue appropriate legal actions, including for the protection of our interests,” the letter warns.

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Posted on: 2024-01-30T21:14:17+05:00