After nearly two years, Greentree Holdings Limited has started purchasing shares of TRG Pakistan at the Pakistan Stock Exchange (PSX). This development marks a significant shift, considering the long pause in trading activities by Greentree, a wholly-owned subsidiary of TRG International Limited.
WHAT IS GREENTREE HOLDINGS LIMITED?
Incorporated on August 13, 2020, Greentree Holdings was created to manage the liquid assets of TRG Pakistan Limited. As outlined in a TRG notice from December 20, 2021, the company was intended to “utilize all or part of these Liquid Assets to purchase shares of TRGP from the stock market from time to time, providing value, benefit, and liquidity to the shareholders.”
These liquid assets, which included $120 million in cash and 5.4 million shares of Ibex Limited, were earmarked for strategic investment into TRG Pakistan shares.
FTSE RUSSELL RECLASSIFICATION BOOSTS TRG PAKISTAN BUYING
Interestingly, this new wave of buying coincides with the reclassification of Pakistan by FTSE Russell, which moved the country from Secondary Emerging Market to Frontier Market Status, effective September 23, 2024. This reclassification has resulted in the selling of PSX-listed companies by large funds such as Vanguard, which holds approximately 17 million shares of TRG Pakistan.
A TIMELY OPPORTUNITY FOR GREENTREE HOLDINGS?
Greentree Holdings already holds 28.54% of TRG Pakistan shares. The current buying spree may indicate the end of an indirect “buy-back” process, or possibly the start of a more strategic acquisition move.
Acquiring shares beyond the 30% threshold would trigger a Tender Offer under Section 110 of the Securities Act 2015, a regulatory requirement that compels shareholders to make a public offer to buy more shares when crossing this threshold.
TENDER OFFER POSSIBILITY LOOMS FOR TRG PAKISTAN
As of Greentree’s last Corporate Briefing Session held on June 27, 2024, the company held $30 million in cash, and the 5.4 million shares of Ibex Limited were still unallocated. Combined, these assets represent a total value of $136 million.
If Greentree proceeds with a Tender Offer, it would require approximately $40 million to buy back 50% of the free float shares at an assumed price of Rs60 per share. Greentree’s financial capability makes this move feasible, but litigation may complicate the process.
POTENTIAL LEGAL CHALLENGES AHEAD
TRG Pakistan is already facing legal challenges from significant shareholders and former CEO Mr. Zia Chishti. Any move towards a Tender Offer may result in additional litigation, putting further pressure on the company’s management.
FUTURE OUTLOOK FOR TRG PAKISTAN
The future of TRG Pakistan hinges on whether Greentree Holdings’ strategy leads to a significant culmination of value for shareholders or fades amid legal challenges. The next few weeks may determine if the company achieves its goal of delivering “value, benefit, and liquidity” or if further delays loom ahead.
