KARACHI: As a British energy giant seeks to acquire stakes in Shell Pakistan (SPL) in a potential $200 million deal, financial experts said on Tuesday the entry of credible international players was important for Pakistan’s corporate ecosystem.
Shell Petroleum Company announced its exit from Pakistan in June with the sale of its 77 percent shareholding in the local business. The move came after Shell made several announcements about its global operations and after Shell Pakistan (SPL) suffered losses in 2022 due to exchange rates, the devaluation of the Pakistani rupee, and overdue receivables, and as the country faces a financial crisis and economic slowdown.
The offloading of shares also includes all of SPL’s downstream businesses and SPL’s 26 percent ownership of Pak-Arab Pipeline Company Ltd. (PAPCO). Shell Pakistan is a listed company with market capitalization of over Rs34.35 billion ($124.5 million).
Since the announcement, State-owned Pakistan Refinery Limited and Air Link Communication, a local firm, have both said they were seeking to buy stakes in Shell Pakistan. Interest by Saudi buyers has also been widely reported.
However, SPL announced in a stock filing on Monday that it had received “firm intention” from Prax Overseas Holdings Limited to acquire control or 165,700,304 (up to 77.42 percent) voting shares. The acquirer, the listing said, was also looking to secure an extra 11.29 percent or 24.16 million shares through a public offer.
Britain’s Prax Overseas Holdings, an investment company, is part of the Prax Group, headquartered in London with interests in exploration and production, refining, logistics, and integrated supply and optimization.
Pakisani analysts called the Prax interest in Shell Pakistan “an interesting development” that would have positive implications for Pakistan’s energy sector and the overall economy.
“Having another foreign company invest in the country can bring in new capital, technology, and expertise, potentially boosting the energy sector’s efficiency and competitiveness,” Ali Nawaz, CEO of brokerage firm Chase Securities, told Arab News.
Nawaz estimated that a possible deal value, depending on various factors such as the assets involved, market conditions, and negotiation terms, would in the range of $170 million to $200 million.
The SPL has recently also received interest from Saudi companies including oil giant Aramco and Wafi Energy, a leading fuel station firm, according to SPL officials privy to the issue, who did not want to be named.
“The parent company, SPC, is directly dealing with potential buyers and will set the scheduled for due diligence of the company,” an SPL official, requesting anonymity, told Arab News on Monday.
Financial experts said it was important for Pakistan’s “corporate ecosystem” that the buyer was a credible operator who had the ability to maintain standards set by Shell.
“This is why the news about potential interest by Aramco gained so much public interest. There is optimism and expectations in Pakistan about the prospects of foreign investment from Saudi Arabia,” Ali Fareed Khwaja, chairman of KTrade, a Pakistan and UK based brokerage firm, told Arab News.
“Consequently, I think that the market would react more positively for a Middle Eastern group buying Shell rather than a British holding company. There are also some fears that the multinationals are pulling out and would be replaced by local investors.”
However, Nawas said it was essential to consider any buyer’s track record in the industry, commitment to sustainable practices, and the potential benefits they can bring to the local economy.
“When comparing [UK company] with Saudi interests, it becomes a matter of geopolitical and economic considerations,” Nawaz added.
“Both Prax and Saudi interests could bring unique advantages, and the choice might hinge on the alignment of the buyer’s vision with Pakistan’s long-term goals and interests.”
