PSX to Determine Minimum Purchase Price for Pakistan Suzuki Delisting

PSX to Determine Minimum Purchase Price for Pakistan Suzuki Delisting

Karachi, December 5, 2023 – The Pakistan Stock Exchange (PSX) is set to determine the minimum purchase price for the delisting of Pakistan Suzuki Motor Company (PSMC), a decision closely monitored by market analysts at Topline Securities.

The analysts note that the minimum purchase price cannot be lower than Rs406 per share and will consider various factors deemed appropriate while fixing the share price.

In a notice submitted to the exchange, PSMC officially communicated a minimum purchase price of Rs406 per share for the delisting process. This announcement follows PSMC’s earlier disclosure on October 19, 2023, wherein the board approved the purchase of all outstanding shares held by minority shareholders, paving the way for the company’s delisting under Rule 5.14 of the listing regulations. The delisting will adhere to the updated regulations implemented on February 15, 2023.

According to the listing regulations, the proposed price for delisting shall not be less than the highest of five criteria, details of which are available in a previous report titled “PSMC Announced Board Meeting for Potential Delisting” dated October 12, 2023.

While the PSX rulebook does not specify a timeline for the decision, historical precedent suggests that such determinations usually take one to two months. Once the minimum purchase price is determined, sponsors have seven days to convey their acceptance or file an appeal against the decision.

Notably, the analysis of past precedents reveals the potential for an upward price revision from the proposed minimum of Rs406 per share. Over the last four years (2020-2023), in six deals, the agreed-upon price was higher by a substantial margin, ranging from 13% to 485% above the minimum price set by the company.

As per the updated regulation, when sponsors’ shareholding is less than 90%, they are obligated to increase their shareholding to at least 90% to qualify for delisting. In the case of PSMC, where the sponsor currently holds 73%, acquiring a minimum of 13.9 million shares from minority shareholders is necessary to meet the delisting requirements.

However, if the sponsor cannot obtain the required shares for delisting, and the Exchange deems compliance impracticable, the Exchange may relax such requirements under recorded reasons and conditions.

If the sponsors successfully acquire the determined quantum of shares as per PSX regulations and gain approval from shareholders in a general meeting, the sponsors’ buyback offer will be deemed successful, leading to the subsequent delisting of the company from the Exchange.

While a successful delisting could inject cash liquidity into the market, analysts caution about potential long-term repercussions. Delisting may not be favorable for the capital market, as it would reduce market capitalization and free float, impacting the overall dynamics of the stock exchange.

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