Wafi Energy acquires majority stake in Shell Pakistan

KARACHI:

Saudi Arabia’s Wafi Energy has acquired a majority stake in one of the oldest foreign companies operating in Pakistan, Shell Pakistan, gaining management control at Rs 118 per share. This acquisition translates to a total purchase price of Rs 19.55 billion ($70 million), according to the stock exchange filing.

Wafi Energy Holding, a leading oil marketing company operating service stations in the Middle Eastern country, has purchased all sponsor shares from the outgoing Dutch owners (Shell Petroleum Company Limited), totaling 165.70 million shares or 77.42% stake , making a strategic acquisition in Pakistan.

In a notification to the Pakistan Stock Exchange (PSX), Arif Habib Limited, the offer manager, announced that Wafi Energy LLC would acquire an additional 24.16 million shares, equivalent to 11.29%, from minority shareholders in 155 .11 per share in compliance with the substantive acquisition and redemption of shares in Pakistan rules, 2017. The additional purchase at the offer price amounts to a further investment of Rs 3.75 billion ($13.5 million).

The price offered to potential retailers is higher by Rs 10.17 per share compared to Shell Pakistan’s closing price of Rs 144.94 on Friday. The stock was up Rs 1.69, or 1.18%, at the closing level. However, it remains well below the one-year high of Rs 180 per share and the five-year high of Rs 281.28 per share on the Pakistan Stock Exchange (PSX).

Wafi Energy LLC signed the share purchase agreement (SPA) to acquire the majority stake with the owners of Shell Pakistan in October 2023. The acquisition process is expected to be completed in the next three to six months.

The Saudi Arabian buyer “intends to increase its business investment in the energy sector in the region,” the statement said. Shell Pakistan is expected to receive immediate financial revival driven by technological upgrades, facility efficiency, working capital requirements, human resources and more. This is expected to improve product quality and competitiveness.

Shell Pakistan will continue as a listed company after the proposed acquisition and continue its business as usual, according to the notification. Shell Pakistan Limited, listed on the Pakistan Stock Exchange (PSX), maintains a significant business footprint in Pakistan, comprising more than 600 mobility facilities, 10 fuel terminals, an oil blending plant and a 26% stake in Pak-Arab Pipeline Company Limited. In addition, it holds a 25% stake in the Parco pipeline.

In a major setback to Pakistan’s already struggling economy, Shell Pakistan, the 75-year-old Dutch oil marketing company, announced its intention to exit the country in June 2023. The decision came after the company reported a net loss of Rs 4.76 billion in the quarter ended March 31, 2023. The company cited the unprecedented depreciation of the rupee, rising inflation and macroeconomic uncertainty as major factors contributing to its struggles in the country.

In its latest financial report for the quarter ended March 31, 2024, Shell Pakistan reported a net profit of Rs 314 million, turning around from a huge loss of Rs 4.76 billion in the same quarter last year. However, the company still believes that the existing working environment remains challenging for oil trading companies in the country, raising concerns that unchecked smuggling of petroleum products and the economic slowdown would keep working conditions difficult.

Demand for petroleum products hit an 18-year low of 15.3 million tonnes in the financial year ending June 30, 2024, down 8% from 16.6 million tonnes in 2023.