DHCL announces discontinuation of dialogue with Pakarab Fertiliser
December 12, 2012
Dawood Hercules Corporation Limited (DHCL) on Tuesday announced to discontinue dialogue with Pakarab Fertiliser Limited for possible sale of its share holding in DH Fertiliser plant.
With this announcement, DH Fertiliser plant’s share sales purchase deal between DHCL and Pakarab Fertiliser has been lapsed. According to Dawood Hercules announcement sent to Karachi Stock Exchange, the previously announced plan to sell its share in the DH Fertiliser plant by Dawood Hercules Corporation Limited to the Pak-Arab Fertiliser Company, has been shelved.
On September 17, 2012, a memorandum of understanding (MoU) was signed between DHCL and Pakarab Fertiliser in relation to a possible sale of DHCL’s entire shareholding in DH Fertiliser Limited to Pakarab Fertiliser. The consummation of the transaction under the MoU was subject to entering into definitive agreements and under MoU the parties made no bidding agreement in relation to the transaction. While till date no definitive agreement has been entered into.
However, now, the board of directors of DHCL at its meeting held on Monday has decided that DHCL does not wish to pursue the transaction for commercial reasons. DHCL has also informed Pakarab of its intention to discontinue the negotiations in relation to the transaction.
The proposed deal has now been confirmed to be off the table and the Dawood Hercules Corporation would continue to own and manage the said fertiliser plant near Sheikhupura. When this deal was announced a due diligence process was also initiated by the Pakarab Fertiliser Company and extensive negotiations were held to finalise the deal. Industry sources claim that the manipulation of gas through Sui Northern Gas Company Limited (SNGPL) by certain elements resulted in the deal not getting through.
Due to gas shortage in the country, the Ministry of Petroleum in May, 2012 announced a plan to supply Gas by rotation to two plants at a time for a month each. However, after the first month, the gas rotation formula was abandoned and SNGPL adopted a discriminatory gas supply policy. Engro and DH Fertiliser plants received gas for only 45 and 62 days, respectively during the current year, and Pak Arab Fertiliser and Agritech plants received gas for 110 and 108 days, respectively. Sources further revealed that SNGPL also treated discriminatorily DH Fertiliser and Engro by not providing agreed gas as per formula devised by the Ministry of Petroleum.