FSL Research - Investor Guide Pakistan

Textiles
Gadoon Textile Mills, Fazal Textile Mills Merger
16th December, 2014
At a board meeting on the 15th of December 2014, the Board of Directors of Gadoon
Textile Mills (GADT) has announced a merger with Fazal Textile Mills. As per our
understanding sponsor shareholders (YGB Shareholders) of Fazal Textile Mills are to
receive 1.55mn shares of GADT while minority shareholders are to receive 3.04mn
shares of GADT.
Fortune Securities Ltd.
According to disclosures in last year’s accounts, sponsor shareholders who owned
4.58mn shares of Fazal Textile Mills (FZTM) transferred shares to YGB holdings
(Private) Limited and are to receive 1.55mn shares of GADT. This translates into a
swap of 0.34 shares of GADT for every 1 shares of FZTM.
Minority share holders of FZTM who own 1.6mn shares of the company are to
receive 3.04mn shares which translate into a swap ratio of 1.89 shares of GADT for
every 1 share of FZTM.
At current market prices, GADT trades at PKR 314.74/share while FZTM trades at
PKR 897.65/share. Every minority shareholder at market prices, with a swap ratio of
1.89 will receive GADT worth PKR 594.85/share of FZTM which is lower than the
current market price of FZTM.
Financials (PKR 'mn)
GADT FY14
FZTM FY14
Sales
20,060
6,537
26,597
Cost of Sales
18,130
5,967
24,097
Gross Profit
1,930
570
2,500
Finance cost
740
148
888
Profit after tax
Yousuf M. Farooq
Phone: +92-21-35309086
[email protected]
Merged FY14
581
118
699
EPS
24.78
19.12
24.94
No of Shares ('mn)
23.44
6.19
28.03
Source: Company Accounts, Fortune Research
At FY14 earnings, the swap ratio will not lead to any significant increase in earnings
for the merged company.
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Fortune Securities Limited | Equity Research

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