Delisting of

Unilever Pakistan
from
Stock Exchange
Financial
Research Report

SURF EXCEL+

LIPTON+

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Table of Contents
Preface ..Page No. 3
Case Background.Page No. 4
First Offer.Page No. 4
Offer AnalysisPage No. 4
Response from InvestorPage No. 5
Response from Karachi Stock Exchange...Page No. 5
Unilever Acceptance..Page Mo. 6
Buy Back CostPage No. 6
Unilever Pakistan Delisted..Page No. 7
Critical Analysis..Page No. 8
Buy Back Impact.Page No. 11
Annexure.Page No. 15
a.
b.
c.
d.

Unilever Financial Report 2012

Unilever Offer Acceptance Letter
Financial Articles
Newspapers Clippings

Case Study: Delisting of Unilever Pakistan from Stock Exchange

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PREFACE
Unilever Pakistan (The Company) is a limited liability company incorporated in Pakistan and was
listed on the Karachi, Lahore and Islamabad Stock Exchanges. It manufactures and markets
home and personal care products, beverages, ice cream and spreads. Unilever has been serving
the consumer needs of Pakistan since 1948.
Unilever Pakistan (Company), after almost 32 years of being listed, has decided to voluntarily
delist from all Stock Exchanges of Pakistan. In this report, analysis will be made to evaluate the
factors behind the delisting of the Company and share buyback program.
The source of information utilized in this research report includes financial statements of the
Company, research articles, and information on financial and business news websites.
h

This report is a joint effort of EMBA CM 12 study group as mentioned below along with the
assistance of Mr. Sheheryar Saeed (Associate Chartered Accountant):

Nasar Ailia Naqvi

Mohib Ur Rehman
Umair Hussain
Rais Ur Rehman

Case Study: Delisting of Unilever Pakistan from Stock Exchange

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CASE BACKGROUND
In November 2012, Unilever Pakistan decided to seek voluntary delisting from all the three
stock exchanges of the country, according to a letter issued by Unilever Pakistan.
According to a letter of Unilever addressed to all the three stock exchanges, Unilever Overseas
Holdings Limited, United Kingdom, which currently holds above 75 percent shares of Unilever
Pakistan, has decided to acquire all the remaining outstanding ordinary shares of Unilever, and
to seek its delisting from all the three stock exchanges of Pakistan.

FIRST OFFER
Unilever Overseas Holdings a wholly-owned subsidiary of London-based Unilever plc
currently owns just over 75% of Unilever Pakistan. The foreign parent is offering Rs 9,700 per
share closing price on the Karachi Stock Exchange to existing shareholders for their current
holdings.

OFFER ANALYSIS

During the first three quarters of 2012, while the companys revenues increased by 15% to
Rs43.9 billion, its profits increased by a staggering 49%, on the back of improved margins.
And it is that improvement in margins that has investors interested: Unilever Pakistan
currently has an operating margin of around 13.2%, which we feel will eventually reach 17% or
18% in the coming years, said Saraogi.
As a result, there is almost universal consensus that Unilever Pakistan has been grossly
underpriced. Given its growth prospects, the company should offer a higher earnings multiple,
and the price should be at least Rs15,000 per share, if not higher, said Shahid Aziz Siddiqi, the
chairman of State Life Insurance Corporation, the countrys largest life insurer, which has about
a 2.1% share in Unilever Pakistan.

Case Study: Delisting of Unilever Pakistan from Stock Exchange

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RESPONSE FROM INVESTORS

Unilevers application for delisting invited the interest of investors and its share price increased
by Rs485 per share to Rs10,185 per share from Rs 9,700 per share. A total of 3,460 company
shares were traded in the session.

RESPONSE FROM KARACHI STOCK EXCHANGE

In early 2013, Karachi Stock Exchange (KSE) announced that the Unilever will be required to pay
nearly 55% higher than its initial offering price to its minority shareholders if it wants to go
ahead with the plan of taking its Pakistani subsidiary private.
In a notice released, the KSE stated that its internal committee that will be supervising the
delisting process has recommended a price of Rs15,000 per share for delisting and given
Unilever seven days to respond to the price, much higher than the Rs9,700 per share that
Unilever had offered when it first announced its intention to delist one of its two Pakistani
subsidiaries.

Case Study: Delisting of Unilever Pakistan from Stock Exchange

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UNILEVER ACCEPTANCE

In April 2013, Unilever has accepted the Karachi Stock Exchanges (KSE) proposal to de-list its
subsidiary Unilever Pakistan from the KSE at a price of Rs15,000 per share, about 55% higher
than its initial offer price of Rs9,700 per share.
The move will come as a blow to many of the institutional investors who had hoped to be able
to persuade the exchange to either stop the delisting outright, or at the very least permit a
direct negotiation between Unilever and its minority shareholders.

ESTIMATED BUYBACK COST

The buyout will cost Unilever nearly Rs 50 billion ($503 million), which the company is keen to
bill as a symbol of its commitment to Pakistan. This decision reinforces the parent companys
confidence in, and commitment to, the opportunity that the Pakistani consumer market offers
and therefore the growth potential of the Pakistan business, said Ehsan Malik, CEO Unilever
Pakistan.
Case Study: Delisting of Unilever Pakistan from Stock Exchange

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UNILEVER DELISTED FROM STOCK EXCHANGE

In Sept 2013, Unilever Pakistan delisted from Karachi Stock Exchange after completing
formalities of Buy Back of Shares and at Rs. 15000/- per share.
Official announcement of delisting was made through stock exchange web sites.

Case Study: Delisting of Unilever Pakistan from Stock Exchange

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UNILEVER DELISTING CRITICAL ANALYSIS

Normally there are various reasons for any company to be delisted from Stock Exchange
including financial crises, poor stock performance, and complex statutory and reporting
regulation. However, Companies also opt for delisting according to their business needs.
However, it is pertinent to mention here that it is not only Pakistan but also in India and Nigeria
that Unilever is buying back their stake. Therefore, the decision of Unilever Pakistan delisting
must be evaluated after considering global performance of Unilever.
1-

Share Performance of Unilever

The first thing that comes to mind while analyzing delisting is bad performance of shares.
However, in this case, Unilever Share is performing well. Following graph is self-explanatory:

Hence, we cannot assume this might be the reason for delisting of Unilever share.
[

2-

Strong Business need

Before starting our evaluation, first lets just summarize the global performance of Unilever
with emerging markets performance.
Particulars

Sales Growth
Net Profit

Unilever Group
2013
2012

4.30 %
10.50 %

6.90 %
9.42 %

Hindustan Unilever
2013
2012

17%
13.91 %

Case Study: Delisting of Unilever Pakistan from Stock Exchange

12.4 %
11.61 %

Unilever Pakistan
2013
2012
(Based on
HY results)
13.11 %
15 %
10.11 %
9.19 %

Page 8

The other important aspects that also need to be included are Unilever Global Turnover mix on
geographical basis. Summary for the same is as under:
Particulars
2013
20,085

2012
20,357

Percentage mix
2013
2012
40.33 %
39.66 %

16,206

17,088

32.54 %

33.29 %

Europe

13,506

13,879

27.12 %

27.04 %

Total

49,797

51,324

100 %

100 %

Asia/
AMET/RUB1
Americas

Turnover

From the above table, we can analyze that emerging markets are performing better in term of
growth and profitability as compared to American and European markets which are almost
saturated. Therefore, this might be a reason that globally Unilever strategically decided to
acquire shareholding of emerging markets subsidiaries to provide maximum benefits to local
shareholders. Further delisting also provides the Company to work more cost effectively due to
less reporting requirements and concise management structure.
Same argument has been supported in various financial articles published. Summary of these
articles are as under:
Sr.No.

Important points in articles

Website reference

In all, Unilever's eight subsidiaries are listed at the

local bourses. In the rest of the word including
Europe, North America and key emerging markets
such as China, Turkey, Russia, Brazil, Mexico and
Thailand, Unilever operates through wholly owned
unlisted subsidiaries.

http://www.businessstandard.com/article/companies/u
nilever-s-footprint-in-emergingcountries-113050100042_1.html

Unilever is not changing its strategy in emerging http://www.theguardian.com/busi

markets despite an economic slowdown last year ness/2014/jan/21/unileverthat has shrunken consumer demand, said its chief emerging-markets-sales-profits
executive, Paul Polman. He added that growth in
emerging markets remains well above that in
developed markets.

Going privateBy acquiring 100% stake in Indian http://www.financialexpress.com/

subsidiaries and delisting, any strategic decision- news/buybacks-signs-of-greenmaking (e.g. royalty payment) process gets a lot shoots/1217857
1

Refers to Asia, Africa, Middle East, Turkey, Russia, Ukraine and Belarus.

Case Study: Delisting of Unilever Pakistan from Stock Exchange

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smoother for the parent company. Also, as a

private entity, disclosure norms are more relaxed
compared to a public entity.

Unilever Pakistan has been among the biggest

beneficiaries of the boom in consumption in
Pakistan, a country of 200m people that will soon
be the fourth largest in the world.

http://www.ft.com/cms/s/0/c083e
9e4-6c87-11e3-ad3600144feabdc0.html#axzz2w4AsEcq
U

Unilever Plc will get a larger share of sales and

profits from emerging markets, which are growing http://www.thehindubusinessline.c
om/markets/stock-markets/whyfaster than developed markets.
Emerging markets provided 57 per cent of
Unilevers revenues in the March quarter, up by 10
percentage points over five years. These markets
have been steadily delivering sales growth of over
10 per cent for the past eight quarters. Developed
regions, in contrast, saw deceleration sales in
Europe, for instance, declined by 3 per cent in the
March quarter

Unilever growth in Pakistan is significantly higher,

while Unilevers global revenues grew by around
5%, revenues in Pakistan grew by a much stronger
9.9%, even when taking into account the rupees
depreciation against the euro, the companys,
global reporting currency. In Pakistani rupees,
gross revenues of both companies grew by nearly
17%.

Case Study: Delisting of Unilever Pakistan from Stock Exchange

unilever-wants-a-larger-slice-inhul/article4670825.ece

http://tribune.com.pk/story/46935
0/food-consumer-goods-unilevertargets-pakistan-among-toppriority-markets/

Page 10

BUYBACK IMPACT UNILEVERS PERSPECTIVE

A) Catching the High Growth Potential:

Unilever has been among the biggest beneficiaries of the boom in consumption in Pakistan,
a country of 200m people that will soon be the fourth largest in the world. This vibrant
consumer sector stands in stark contrast to the nations image as either a feudal, agrarian
rent-seeking economy or as a violence-ridden failed state.
One area where Unilever Pakistan has succeeded is in tapping into rising prices for
agricultural and dairy products the country is now the fifth largest rice producer in the
world. But its performance is also testimony to the resilience of Karachis business
community, which has learnt to operate in a harmful environment, adopting resourceful
strategies to overcome the daunting obstacles they face
In last few years, Unilever Pakistan has witnessed high business growth from Pakistan due
to right strategies, product mix and market potential compared to more developed
markets.

The company had been so profitable that it made more sense for the parent, and its
shareholders, to enjoy all of the upside rather than sharing it with local investors.

Case Study: Delisting of Unilever Pakistan from Stock Exchange

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