Engro Corporation is considering the sale of up to 29% of the entire issue and paid up share capital of Elengy Terminal Pakistan Limited (ETPL) to Vopak LNG Holding B.V. (Vopak).
The decision to do so would be made at the Eighteenth Extraordinary General Meeting of the firm, which is to be held on Tuesday, September 25, 2018 at 10:00 am for this purpose.
Engro Corporation Limited and Vopak have entered into a Share Purchase Agreement (SPA) on July 19, 2018 in relation to the proposed sale of up to 29% of the share capital of Elengy Terminal Pakistan Ltd.
The cost of 29% of ETPL’s share capital, measured by the book value of these shares recorded in Engro’s books, as at 30th June 2018, was PKR 587,751,270.
In an announcement to the Pakistan Stock Exchange, Engro informed that as per a recent valuation conducted by an independent valuer, the fair value of the shares proposed to be sold is up to PKR 2.3 billion. The sale price agreed upon in the SPA is however expected to be higher than the book value and fair value of the shares, and has been agreed at USD 38,296,915, subject to certain downward adjustments set out in the agreement.
In terms of the SPA, completion of such sale of share of ETPL is subject to all regulatory and corporate consents, including the approvals from the shareholders of the Company.
ETPL was initially a wholly owned subsidiary of Engro Corporation, and was incorporated as such on January 4, 2012. At the time, investments in it were not made through the approval of shareholders as the law dictates that all investments made by a holding company in its wholly owned subsidiary were exempted from approvals from the shareholders.
Later, Engro Corporation disposed off 20% of its shareholding in ETPL to the International Finance Corporation (IFC), also without the approval of the shareholders, as the law dictated that any divestment by the Company that would result in its shareholding falling below 75% for the subsidiary for which this exemption was claimed, would need approval from the shareholders. Since a sale of 20% share to IFC brought Engro Corporation’s holdings in ETPL to 80%, the approval was not needed at the time.
However, since the recent share purchase agreement with Vopak is going to reduce its holdings to below 75%, the company would need prior approval from its shareholders in this respect.
It is worth mentioning that Engro Corporation and IFC are parties to a Shareholders Agreement dated April 27, 2015 under which IFC has been granted a 'tag along right' on the shares of ETPL.
In terms of the SPA, if IFC does not exercise its ‘tag along rights’, Vopak shall acuire 29% of the shares of ETPL from Engro, but incase it does exercise its rights to tag along, Vopak will only be able to acquire 23.2% of the shares of ETPL from Engro, while the remaining 5.8% of the shares will have to be acquired from IFC.
Vopak is a 100% subsidiary of Royal Vopak N.V., which is a world leading independent tank storage company. It has a 400-year history and operates a global network of 66 tank terminals in 25 countries.