FFC lifts stake in FPCL to nearly 100% through share swap

Fauji Fertilizer Company Limited (FFC) has completed a share-swap transaction to acquire Fauji Foundation’s remaining stake in FFBL Power Company Limited (FPCL), raising its ownership to nearly 100%, the company said in a filing to the Pakistan Stock Exchange.

Under the transaction, FFC acquired 214.7 million FPCL shares held by Fauji Foundation through a share swap at a ratio of 13.49 FPCL shares for each FFC share. As consideration, FFC issued 15.9 million new ordinary shares to Fauji Foundation through an offer other than rights, according to the filing.

FFC’s holding in FPCL increased from 644 million shares to 859 million shares following the transaction, effectively making FPCL a wholly owned subsidiary.

The company said shareholder approval for the issuance was granted at an extraordinary general meeting held on Dec. 8, while the Securities and Exchange Commission of Pakistan subsequently approved the transaction.

Earlier disclosures to the stock exchange were made on Nov. 10, Nov. 14 and Dec. 8.

Following the issuance, the total number of FFC’s outstanding shares rose to 1.439 billion from 1.423 billion, implying a net dilution of about 1.1% for existing shareholders.

Fauji Foundation’s stake in FFC increased to about 44.3% from roughly 43.5%, with its shareholding rising to 637.8 million shares.

Merger reserve

In a separate research note, Arif Habib Ltd. said the transaction is expected to result in the creation of a merger reserve.

FPCL’s book value per share stood at PKR 31.93 as of June 2024, though this does not reflect current-year performance. Based on June 2024 figures, FPCL’s equity value attributable to FFC was estimated at PKR 20.6 billion before the acquisition, increasing to PKR 27.4 billion after consolidation of Fauji Foundation’s stake.

FFC issued the new shares at par value, amounting to PKR 159 million, with the excess adjusted through a merger reserve of about PKR 6.7 billion related solely to the FPCL transaction, Arif Habib said.

The brokerage said the acquisition is expected to enhance FFC’s earnings and dividend income from FPCL.

On a pre-acquisition basis, FFC’s share of FPCL dividend income was estimated at PKR 966 million in calendar year 2026 and PKR 1.61 billion in 2027, translating into after-tax earnings per share of PKR 0.57 and PKR 0.95, respectively.

Post-acquisition, dividend income attributable to FFC is projected to rise to PKR 1.29 billion in 2026 and PKR 2.15 billion in 2027, equivalent to after-tax EPS of PKR 0.76 and PKR 1.27. Assuming no withholding tax, given FPCL’s status as a wholly owned subsidiary, earnings could increase further to PKR 0.90 per share in 2026 and PKR 1.49 per share in 2027, the report said.

FPCL is expected to generate an annual return on equity of about PKR 1.8 billion to PKR 1.9 billion in 2026 and 2027, according to Arif Habib estimates.