The boards of Pakistan’s largest conglomerate, Engro Corporation, and its largest shareholder have approved in principle a restructuring plan, the company said on Monday.
The South Asian nation is embarking on a tricky path to economic recovery following the completion of a nine-month $3 billion International Monetary Fund bailout approved in July, averting a sovereign debt default. Economic challenges have impacted the business environment and investment sentiment.
“The Proposed Restructuring would allow the capital at play within the Engro system to be more productive, especially in a challenging macroeconomic environment which currently does not appear conducive for large scale projects,” the company said in a notice to the stock exchange.
The absence of conducive investment conditions constrained Engro Corp’s ability to allocate capital to ensure increasing future returns to shareholders, it added.
The two-step process rebrands the conglomerate’s top shareholder, Dawood Hercules Corporation, to Engro Holdings, making Engro Corp its wholly-owned subsidiary. Engro Corp’s minority shareholders would become shareholders of Engro Holdings in a ratio that preserves their economic ownership of Engro Corp.
Following this move, DH Corp will only be investing in Engro Corp.
The aimed to “synergize the capital allocation efforts of both companies which are presently pursuing investments independently,” the notice said.
“Integrating these efforts would result in a broader array of opportunities for capital deployment, thus improving potential returns for all shareholders.”
Last week, top officials from Engro Corporation, were exonerated and acquitted by an accountability court in a case over a liquefied natural gas (LNG) contract.
Last month, Engro Energy, a subsidiary Engro Corp agreed to sell its thermal energy assets to a consortium for around 34.7 billion rupees ($124.9 million to better allocate its capital and resources.
In April 2023, Engro announced a 400% increase in interim dividend after an analysis of investment opportunities available at the time.
