The TRG Saga: Stirrings in the Muddy Pond

September 23, 2024 (MLN): After a long hiatus of almost 2 years, Greentree Holdings Limited has once again started to purchase TRG Pakistan shares at PSX.

To recall, Incorporated on August 13, 2020, a wholly owned subsidiary of TRG International Limited, Greentree Holdings Limited was the recipient of liquid assets that belonged to TRG Pakistan Limited.

Termed as an “SPV”, in the TRG Notice dated December 20, 2021, the ex-ante incorporated Greentree Holdings Limited was supposed to “utilize all or part of these Liquid Assets to purchase shares of TRGP from the stock market from time to time, to provide value, benefit, and liquidity to the shareholders of TRGP”.

These liquid assets comprised $120m in cash and 5.4m shares of Ibex Limited.

Interestingly the current buying coincides with FTSE Russell reclassification of Pakistan from Secondary Emerging to Frontier Market Status, effective from Monday, September 23, 2024.

This reclassification has led to the selling of certain PSX-listed companies held by Vanguard Fund; TRG Pakistan being one of them. Vanguard holds approximately 17m shares of TRG Pakistan.

The only consideration is that the timing of the provision of “value, benefit, and liquidity to the shareholders of TRGP” is congruent with Vanguard selling. Even before this selling, the stock price touched a low of Rs50.88/- but somehow Greentree Holdings did not find it optimal to provide liquidity at that time.

Since Greentree Holdings already holds 28.54% shares of TRG Pakistan, therefore either the current buying is an indication that the indirect “buy-back” process is coming to an end or that Greentree Holdings is proceeding ahead with the acquisition of TRG Pakistan.

To recall, the acquisition of shareholding above the 30% threshold triggers a Tender offer under Section 110 of the Securities Act 2015.

On the first possibility, which is much simpler, TRG Pakistan and Greentree Holdings Management shall logically conclude the purchase of shares and all ring-fenced assets held abroad shall be remitted to TRG Pakistan.

The second possibility, however, involves much more complexity. As per the last Corporate Briefing Session of the company, held on June 27, 2024, Greentree Holdings possessed $30m in cash while 5.4m shares of Ibex Limited were still not allocated to it.

Combined, these assets translate into a total cash value of USD 136M. As per SEC filings, Resource Group International sold 29,657 shares of Ibex Limited on the 16th and 17th of September 2024.

On the other hand, a Tender Offer, for 50% of the Free Float at an assumed price of Rs60/- would require approximately $40m.

Hence, given the will of a concrete strategy, Greentree Holdings can muster enough resources to proceed ahead with the Tender Offer.

However, TRG Pakistan and its Management is facing litigation for its earlier conduct by Mr Zia Chishti and other significant shareholders and Directors. Therefore, proceeding ahead with a Tender Offer might lead the Company towards a torrent of further litigations.

Nonetheless, this route shall still involve the remittance of remaining ring-fenced assets back to TRG Pakistan.

It remains to be seen whether the value, benefit, and liquidity process culminates in a crescendo or peters out soon!

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