Karachi May 15 2024: The Board of Directors of the Searle Company Limited has in-principal approved the disposal of 100% shareholding /control of Searle Pakistan Limited, according to company filing to the exchange.
Furthermore, the Board of Directors has authorized the management to negotiate and finalize the deal terms with the relevant parties and submit the finalized terms for the consideration of the Board.
Initially, SEARL’s intent was to explore different investment options to improve
the liquidity position of SPL which is significantly leveraged (debt/equity: 45%). SEARL was initially (i) reconsidering listing on the PSX by way of IPO, (ii) seeking equity investment through strategic partnership under JV, (iii) strategic sale of SPL or its business or (iv) placement of shares with multiple investors through private placement process.
Searle Pakistan Limited, was incorporated on December 3, 2018, under the Companies Act, 2017. SPL is principally engaged in import, manufacture and sale of pharmaceutical products. The Searle Company Limited owns 90.61% stake in the Searle Pakistan Limited.
Searle Pakistan contributed PKR 650 million in net profits (EPS: PKR1.27) in FY23 with total assets of PKR19.8bn. The total investment in SPL stood at PKR 15.8 billion funded through a LT Musharika facility from HBL to the tune of PKR 10 billion and the remaining from issuance of right shares (net acquisition cost was PKR 8.6 billion).
“We think carving out of SPL would lead to a negative impact on operating profits but a positive impact on the net earnings due to a significant drop in finance costs – we expect this to more than halve following the disposal. Currently SEARL’s debt to equity ratio stands at 45%, which we expect to drop to 20% following the disposal” writes Yusra baig research Analyst at Intermarket Securities.
“Searle Pakistan (formerly OBS) is one of Pakistan’s top corporations in the healthcare segment and is a leading producer of iron sucrose injections (brand name: Venofer) which contributes c. 30% to the overall topline” states Yusra.
“SPL has a relatively small drug portfolio where top 5 drugs contribute 65% to the overall topline, all of which fall in the National Essential Medicines List. These are primarily concentrated in the following segments: Nephrology, rheumatology, cardiovascular and antibiotics, etc. The portfolio has increased SEARL’s presence in the scheduled drugs category. SEARL had initially planned to list Searle Pakistan at an estimated PKR 5 billion with the proceeds to be utilized for expansion in the Intravenous segment. However, SEARL acquired Searle IV Solutions in August 2023 via a right issuance,” she added.
