Investment Corporation of Bangladesh (ICB) has planned to buy a portion of stake of Active Fine Chemicals Limited (AFC) in the current market price, subject to the approval of securities regulator.
Analysts say issuing such shares at a price below the market value might result in financial losses for the existing shareholders but financial benefit for the new shareholders.
The company closed at Tk83 per share on Sunday at the Dhaka Stock Exchange.
The listed company in a statement issued in the middle of last month said ICB expressed its intention to subscribe 20m ordinary shares of Tk10 each at an issue price of Tk50, including premium of Tk40, that will be below the current market price.
The proposal from ICB is subject to approval of shareholders in the third extra-ordinary general meeting (EGM) scheduled for December 10, 2013 and subsequent approval from Bangladesh Securities and Exchange Commission, said the statement.
After buying new shares of the company, ICB will hold directorship in the board of directors of the company, it said.
Issuance of 20m ordinary shares, which will be sold to the strategic investor like ICB after regulatory approval, will raise the directors’ shareholdings to 30% from existing 14.78% in line with the regulatory requirements, the company said.
It said this will also help get fresh funds for its expansion plans.
AFC company secretary Md Mahbub declined to make any comment about the issues saying, “I do not want to make any comment before the EGM to be held next month.”
However, he explained that most likely two options can be exercised to meet the regulatory requirements.
“One option can be the directors’ buying back shares from the market but that may drive up the price abnormally. And eventually the retail investors may turn out to be on the losing side as the price will be adjusted after share buy back.” He said the other option is to bring a sponsor that will offer the best deal among the interested sponsors.
Agreement clauses and other details will be discussed at the EGM where the existing shareholders will get to cast their votes regarding the inclusion of new director.
Market participants said other strategic investors were interested to participate in bidding to buy Active Fine’s shares but they failed to do so as the company did not offer auction to sale its stake.