Karachi, November 20, 2024 – TRG Pakistan (TRG) announced that its associate company, The Resource Group International (TRGI), has entered into a definitive agreement with IBEX Limited (Nasdaq: IBEX), which has repurchased approximately 3.56 million shares of IBEX from TRGI. The repurchased shares represent 20% of IBEX’s total outstanding shares, reducing TRGI’s stake in the company from 30% to 12.5%.
The deal, valued at $19.65 per share based on the five-day volume-weighted average trading price of IBEX on Nasdaq, amounts to a total of $70 million. Out of the $70 million, $45 million will be paid to TRGI in cash, while the remaining $25 million will be in the form of seller financing. The terms of the seller financing have yet to be disclosed.
This transaction marks a significant change in ownership for IBEX, as TRGI had been a major stakeholder in the company. According to analysts at Topline Securities, the deal valuation is based on a trailing twelve months (TTM) price-to-earnings (P/E) multiple of 10.5x, while the valuation using EBITDA stands at 5.3x. IBEX’s cash balance, which stood at $50 million with no debt as of TRG’s last analyst briefing in June 2024, is believed to have been used for the share buyback.
The repurchase of shares is a noteworthy move for IBEX, which may also have the option to repurchase the remaining 12.5% stake from TRGI within the next four years, provided certain conditions are met.
The impact of this deal on TRG Pakistan is significant, as the company owns a 68.8% stake in TRGI and holds 45.3% of the voting power. Analysts estimate that TRG’s share of the $70 million proceeds from the deal will amount to $48 million, with $31 million received in cash and $17.2 million in seller financing. This translates to an impact of Rs16-24 per share (Rs16 in cash and an additional Rs9 in seller financing) for TRG Pakistan before tax.
The deployment of the proceeds from this transaction by TRGI remains unclear. Previous proceeds from TRGI’s divestment of e-Telequote were used to retire debt and purchase additional shares in TRG. The company may use this new capital to continue buying back shares of TRG, pay dividends, or reinvest in other ventures. Investors are awaiting further details from the management regarding their deployment strategy.
