Pioneer Cement Limited (PIOC) has sanctioned a new inter-company loan facility with a value of up. The amount of 4 billion is in favour of its parent company, Maple Leaf Cement Factory Limited (MLCF).
The Pakistan Stock Exchange announced the decision. The two entities are continuing to further formalise their financial relationship after last year acquisition.
Earlier this year MLCF acquired a significant interest in Pioneer Cement, becoming the company majority shareholder. The shareholding of the Kohinoor Maple Leaf Group in Pioneer Cement presently exceeds over 77% of the subsidiary paid-up capital with its stake alone in the subsidiary being over 77%.
It was a important acquisition by itself. In the transaction, which is valued at about Rs. 478.43 per share, the companies hold a combined 69.75% stake in Pioneer Cement 75.8 billion.
The combination of Maple Leaf and Pioneer makes them the third largest cement manufacturer in Pakistan in terms of capacity. Combined the two plants – MLCF Daudkhel plant and Pioneer Khushab plant – have more than 13 million tonnes of annual production capacity.
Intercompany financing transactions, such as the recent loan, are not uncommon after the formation of such a parent-subsidiary relationship. Pioneer Cement board had already proposed a much larger cross-corporate guarantee, of up to Rs. 75 billion, as part of MLCF banking facilities that are linked to its acquisition financing, in accordance with the provisions of Section 199 of the Companies Act, 2017, as per the shareholders approval.
It is the latest in a series of recent transactions between the two businesses, under a new common ownership and management. Related-party transactions are normally subject to board approval and (depending on the size) shareholder approval at special resolutions.
Transactions would be disclosed by the minority shareholders of Pioneer Cement because funds are not being transferred among Pioneer operations, but to the associated company. There are regulations in place to make sure this is not the case, and that such arrangements are transparent.
Since the purchase was finalized, Pioneer Cement has continued to do very well on its own operating metrics. In its last quarterly results, the company showed impressive profitability and a healthy sales increase in the first half of the current fiscal year.
Both companies have announced they will keep the Pakistan Stock Exchange (PSX) informed of significant developments in their integration process. The most recent loan was another increment in steadily growing financial and operational ties between the two cement manufacturers since MLCF assumed control.
I can say one positive thing, I didn’t find the article confirming the on July 29. The amount of the loan, terms and interest rate, loan purpose. This was constructed based on data that is factual in relation to the MLCF-Pioneer relationship and therefore has a solid foundation, but the loan-specific information has not been confirmed, so there may be some inaccuracies if you need that information for your use case for accuracy.
