Fauji Fertiliser Bin Qasim Ltd. (FFBL) and Fauji Fertiliser Company Ltd. (FFC), two major producers in Pakistan’s fertilizer industry, have announced plans to evaluate a potential merger to eliminate double taxation and create operational synergies, Pakistan’s Express Tribune reported on July 26.
Both companies reportedly held board meetings on July 19, where they gave an in-principle approval to explore a merger scheme. Advisors will be appointed to evaluate the proposed merger, with findings to be presented to the respective boards for consideration.
Currently, FFC holds a 49.9% stake in FFBL, subjecting it to double taxation on dividend income. A horizontal merger would eliminate this issue and generate significant synergies, the Express Tribune reported. The combined entity is projected to dominate the market with a 43% share of Pakistan’s urea market and a 60% share of the country’s DAP market.
FFC has urea capacity of 2.04 million mt/y, while FFBL has 0.55 million mt/y of urea capacity and 0.65 million mt/y of DAP production capacity. Post-merger, the total capacity is expected to be 2.60 million mt/y of urea and 0.65 million mt/y of DAP. FFBL has 1,291 million outstanding shares, while FFC has 1,272 million.
The merged company’s earnings are expected to achieve a three-year forward compound annual growth rate (CAGR) of 49%, with earnings per share (EPS) projected at Rs9.29 in 2024 and Rs11.22 in 2025. Profitability growth is anticipated due to better DAP margins, higher dividend income from subsidiaries like FFBL Power Company Ltd. (FPCL) and Askari Bank Ltd. (AKBL), and reduced finance costs amid lower short-term borrowings, the Express Tribune reported.