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KARACHI: A Dutch dairy cooperative is set to buy out food giant Engro Foods Limited with an investment of around $460million, in what would amount to the largest private sector takeover by a foreign firm in the country's history.
FrieslandCampina International Holding BV intends to acquire a 51 per cent stake of Engro Foods Limited, one of the largest listed companies at the Pakistan Stock Exchange (PSX), a notification on the bourse's website said Thursday.
The deal would bring in a minimum investment of $460m based on the Pakistani firm's present stock value.
"Yes, it is the largest ever deal in the private sector," analyst Faisal Shaji, head of research at Standard Capital Securities, said.
Citibank Pakistan is the financial advisor.
Shahji added the deal would be closely watched by international investors eyeing the emerging South Asian economy.
"Pakistan is already in the radar range of the world corporate sector and this deal further lifts its image outside," he said.
If finalised the Dutch takeover would boost Pakistan's foreign direct investment (FDI) statistics.
FDI was down by 57pc to $336m in Pakistan for the first seven months of the current financial year compared to the corresponding period in the last financial year ending June 2015.
Pakistan's economy is expected to grow by 4.5pc for the 2015-16 financial year due to lower oil prices, planned improvements in the energy supply, investment related to the China Pakistan Economic Corridor (CPEC), buoyant construction activity, and acceleration of credit growth.
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Comments (55) Closed
Mar 03, 2016 05:12pm
Sad this is because government fails to protect local investors... why can't Pakistani maintain it???
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Mar 03, 2016 05:16pm
Sad to read it
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Mar 03, 2016 05:19pm
Capitalism is coming...
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Mar 03, 2016 05:20pm
Last comments, Sheraz
Are you guys crazy? This is awesome news. 500$ Million from outside would result in 500 million more with Engro Fertilizer which would result in more investment by Engro Fert. into other potential projects.
Economics should be taught in schools.
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Mar 03, 2016 05:21pm
@last comment Its business hazoor. Engro is not running away from the country - they are only selling 51% to invest that amount to other sectors of the economy. An inflow of 460M$ is good news for the economy, send positive signals regarding the investment opportunities and the business environment in Pakistan and might be followed suit by more investment by Engro Food's competitors to increase / maintain their existing market share
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Mar 03, 2016 05:30pm
@Shah Its complete takeover. If there are any job cuts who is responsible? Its a disaster
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Mar 03, 2016 05:32pm
Wonderful news, shows big international corporate confidence in Pakistan economy.
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Mar 03, 2016 05:34pm
It is 51% shares purchase and this is excellent news. Well done Engro Foods. And I wish all teh best to new majority shareholders.
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Mar 03, 2016 05:38pm
@Mrs. Phannay Khan http://www.dawn.com/news/1201322/engro-posts-rs96bn-profit
If the company is posting profit on such a high scale then what is the reason of selling it. Can you calculate that how many years engro will take to repay its price to the Dutch company?
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Mar 03, 2016 05:38pm
@Shah You are wrong. Engro is a profitable organisation. These foreign companies buy the local firm, make profits from here and bring back all the profit to their own country. I think the basic industries like food and fertiliser should be in the hands of Pakistani local firms. Foreigners should be invited for setting up tech firms where Pakistan firms lag behind.
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Mar 03, 2016 05:46pm
@Yousuf @Malika
It is a 51% takeover. They are not buying it for free and it is a publicly listed company in he stock exchange, any one with that kind of cash can buy it. $500 Million is ALOT of money and Engro can do a lot with this money. If it was my money, I would also buy a profitable company.
There might be some job cuts, but know FrieslandCampina, it is a huge company and it doesn't really have a lot of standing in South Asia. What it means is that they would likely expand in Pakistan to cater to Pak market and perhaps Afghanistan and Iran (no sanctions).
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Mar 03, 2016 05:51pm
Short term profit as money is coming in ...... But in longer term loss for Pakistan. Profit will go outside the country and you can expect job cuts just like the telecom companies
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Mar 03, 2016 05:57pm
@Yousuf who told you so that ENGRO FOODS is a profitable entity FDI is coming keeping in view future market potential and not because of the profitability of the company
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Mar 03, 2016 06:07pm
OH GOOD!
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Mar 03, 2016 06:15pm
@Yousuf @Malika - Its FDI which the contrary has been starved off - $336m thus far in seven months. We need more of that. Loss to us is only if they take food giant Engro's food making business out of Pakistan and that isn’t going to happen out of a profitable emerging South Asian economy and producing it in an expensive European country.
I agree with @Shah "Economics should be taught in schools".
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Mar 03, 2016 06:17pm
Quality of the Engro products will increase, and there will be overseas export, bringing revenue to Pakistan.
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Mar 03, 2016 06:23pm
Regardless of lobbies working day and night to sideline Pakistan, the commercial world in the West know the true benefits of the Pakistani market. There are not many countries with a population of 200 million and a sizeable middle class.
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Mar 03, 2016 06:41pm
@Shah Thank you for your comments. Hope our people understand instead of just declaring every thing in country is failure of Government. This is a typical sick mentality of political rivalry only.
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Mar 03, 2016 06:44pm
@malika Stop fearing job cuts, its this highly inefficient approach of our nation and businessmen that has screwed this economy. Face the competition and upgrade your technology and tactics.
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Mar 03, 2016 06:44pm
@malika If the job cut is required, it should be done even by local investor. For God sake, don't ruin our assets by threatening job cut. It can results into total closure like steel mill
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Mar 03, 2016 06:49pm
@Sheraz Ahmed Khan .what sad in it.grow up.
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Mar 03, 2016 07:19pm
This is a good news as far as FDI is concerned. People talking against this news seem to be far from reality & economic sense. We need such kind of FDIs which brings in modern management & technology in food sector- one of the most potential with high growth sector in Pakistan. What kind of people are these who think this negatively.
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Mar 03, 2016 07:20pm
@Samiullah Khan Repay its price to whom? Hello! They are selling their stakes not mortgaging them for a loan. And a company making profit does not mean it cannot be sold. Sometimes you are getting profit out of something but then you determine that if you take out that money and put it somewhere else you might be able to get an even higher return and that's when decisions like these are made. For more details please refer to "Economics for Dummies"
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Mar 03, 2016 08:21pm
I hope there will be more intensive economic co-operation bewteen Pakistan and the Netherlands. The Netherlands has a lot to offer Pakistan in its infrastructure development eg. water management, food processing, modern farming techniques etc. I hope the co-operation would be fruitful and beneficial to both countries.
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Mar 03, 2016 08:30pm
@malika ... ... There are likely to be more jobs.
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Mar 03, 2016 08:40pm
@Yousuf .... ..... Only the Dutch have an the entre' to European and Southeast Asia markets Engro Foods did not have. Engro wanted more growth. The outside world wants more food. 49% of the shares are still held in Pakistan and Engro shares went up on the news. The shareholders own the company and what they want is performance and growth. Growth creates jobs.
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Mar 03, 2016 08:44pm
It will be good for both pakistan and Engro. Engro Foods can utilise the expertise of a dairy sector giant to further grow it's business . What it has currently are Olpers Tarang and Omore. Friesland will be bringing in new products which will also force Nestlé to be more competitive .
Pakistan will benefit by the increased FDI. Engro Corp will be able to utilise these funds in its thar coal mining and power projects, which is what the country requires.
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Mar 03, 2016 08:46pm
@A .... .... Pakistan has a stock market. That means capitalism is already in Pakistan. If you want to be a capitalist buy shares. They increase in value and you don't pay tax on your investment until you sell your shares. Your money will be working for you. That is capitalism. If a farmer owns his own land and a tractor he is a small capitalist too.
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Mar 03, 2016 08:49pm
Pakistan's economy is expected to grow by 4.5pc for the 2015-16 financial year but it must strive to beat its record of over 23% average annual growth in its nascent years!
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Mar 03, 2016 08:51pm
This deal is for Engro Foods according to this news item. The deal is not for Engro Chemicals. Both of these are listed separately in the Pakistan stock exchange.
Engro Foods had faced ups and downs in the stock market for quite sometime now. So I guess it is a good news for Engro Foods Pakistan and its investors.
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Mar 03, 2016 08:52pm
@Muhammad Chaudhry ... The only job cuts would be at the executive and upper management level. The workers won't lose their jobs.
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Mar 03, 2016 08:56pm
@Syed Ali
Engro Corp holds 86% of Engro Foods and it shall sell 51% from its lot. So it will be booking a capital gain on such sale in its books. This is the reason for increase in its share price
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Mar 03, 2016 08:56pm
@Muhammad Chaudhry .... The steel mills closed because neither the stock holders nor the government wanted to invest in a modern upgrades of the mills.
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Mar 03, 2016 09:00pm
@ishrat salim ... ... You have that right.
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Mar 03, 2016 09:14pm
@malika If there are any job cuts, it would be to bring about efficiencies. Now hoew can that be such a bad thing, unless of course you believe in welfare jobs?
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Mar 03, 2016 09:25pm
sad news for Pakistan
these dutch will bring in more expensive and more unhealthy processed foods in Pakistan
Besides Engro foods was something Pakistan could call it own (other than the UHT technology by TetraPak etc) a competition to other MNC's like Nestle!
selling the controlling shares off is a sad news
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Mar 03, 2016 09:44pm
@Samiullah Khan - Why would an investor buy an ailing company that does not post any profit? This is economics 101.
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Mar 03, 2016 10:41pm
IS this not a privately own company? If yes, why we worry....
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Mar 04, 2016 12:02am
@Shah Who is going to sell it for free?????
Ofcourse it is being bought but the money which Pakistani govt is getting now is going to go back to Dutch years on years in the form of profits. Plus although this is called FDI but this type of FDI is not a good. FDI is good if a completely new firm is setting up a completely new base. They are not employing new recruits, they are not building any new factories, they are just buying the already set up Pakistani firm. Its more of a change of ownership of an asset then creating asset/wealth in Pakistan. FDI is not always good if it is just changing of hands of ownership from Pakistani firms to foreign firms.
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Mar 04, 2016 12:04am
@Be Realistic
http://www.dawn.com/news/1201322/engro-posts-rs96bn-profit
do your research first.
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Mar 04, 2016 12:20am
@Harmony-1©
If you keep on giving basic industries to foreign companies then profits which these foreign companies earn are being moved outside Pakistan. In short term you are getting foreign exchange by selling your own companies but in long term it is loss of foreign exchange if these foreign companies take their earnings outside of Pakistan. I am not saying Pakistan should not be open to foreign companies but it should be open to technological and engineering industry where Pakistani firms lag behind.If a Pakistani firm is making good profit then why should we give this to foreign hands. Also these big companies make impossible competition wise for the Pakistani enterpreneurs to set up their own company because of powerful anti competitive practices. Take example of Unilever and P&G...we had Polka and Igloo, both were first bought up and now both factories are closed.
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Mar 04, 2016 01:41am
@adnan
Do you think the pak in tetrapak means Pakistan? It's a Swedish company and Pak stands for packaging in it.
Bad quality processed food? Go ahead and keeping eating the donkeys. Netherlands has the best agricultural system in the world. They are the best in dairy products.
I feel sorry for our nation. We just love to live in doubts and randomness and propagate nonsense without thinking twice.
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Mar 04, 2016 01:42am
4 major benefits; 1- FDI means more foreign currency cash in pakistan coffers , 2- more jobs 3-initial trail for other Western countries, 4- more foreigners visiting and seeing , pakistan is far more stable , richer, more lucrative, and peaceful than outside image portrayed.
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Mar 04, 2016 01:43am
I think foreign investment is good. It will bring MNC culture in this company
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Mar 04, 2016 01:51am
@last comment it won't affect local investors. Pakistan gbp is very low compared to population and is a developing country so there is no limit of investment opportunities. We just need to increase spending. For this we need to improve education rate
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Mar 04, 2016 02:00am
@malika Number of personnel employed in an industry is as per its requirement. Jobs are for work and not for distribution of money as charity. Please differentiate between a social organization and an industry.
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Mar 04, 2016 02:07am
@AXH then may be you need economics201.
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Mar 04, 2016 04:08am
The game has begun. A day will come when we will have nothing
Thanks to the corrupt politicians
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Mar 04, 2016 07:23am
This is sad news. For all the people thinking this is good please consider this:
51% is majority share. Decision making leaves the hands of the local board and will go to the Dutch company.
USD 500mio for Engro is peanuts. Considering it is one of the most profitable company in Pakistan. Additionally, yes this is bringing FDI into the country in the short term, however, for the years to come this is going to cause an outward flow in the form of expat salaries, earning reports etc in the long run.
Lastly, what this is going to do is make the Engro products more expensive because costing structures would need to be converted on to USD scales and due to the exchange rates the margins would seem insignificant and global companies would want to increase those margins as much as possible.
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Mar 04, 2016 07:36am
Everywhere companies get bought by foreign companies. Anyone who is complaining, does not Business 101.
Atlanta
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Mar 04, 2016 10:18am
Do the detractors and naysayers know anything about economics?? This is great news. It will put Pakistan back on the investment map, while Engro will benefit from Dutch technology.
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Mar 04, 2016 12:43pm
It shows Pakistani nation has no ability for bigger business. Engro already in crisis due to their so much business which control is so weak. The fertilizer investment is high but output is very low due to gas shortage and other problems. its may be a start for this group may be they sale other business as well
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Mar 04, 2016 07:06pm
460m peanuts.....
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Mar 04, 2016 08:09pm
Good news indeed
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Mar 06, 2016 06:55am
Good news for Engro Food shareholders, Engro Corporation shareholders as well as for Dawood Hercules shareholders....JACKPOT!
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