STAFF REPORTER ISLAMABAD
The Islamabad High Court (IHC) has restrained Greentree from purchasing TRG shares under the Public Announcement of Offer dated January 15, 2025.
The court has declined to lift the stay on Greentree Holdings Ltd and its adviser AKD Securities Ltd from proceeding with its acquisition of a controlling interest in TRG Pakistan Limited. The IHC’s interim order will remain in effect until the next hearing on March 12, 2025.
The IHC had earlier granted injunction on the basis that Greentree has no funds of its own but was instead illegally using TRG Pakistan’s own money to purchase TRG Pakistan’s shares.
According to details, in 2021, TRG Pakistan had given approximately $200 million to its Bermuda-based affiliate TRG International, which is 69pc owned by TRG Pakistan. The TRG International then gave the money to its 100pc-owned subsidiary Greentree, which used the funds to purchase TRG Pakistan’s own shares.
In 2022, the Securities & Exchange Commission of Pakistan ruled that such conduct by TRG Pakistan and Greentree was illegal under Section 86 of the 2017 Companies Act. The SECP issued a show cause notice to TRG Pakistan for this and other violations, but TRG Pakistan received a stay order from the Sindh High Court that stopped further investigation and enforcement.
Three years later, Greentree is again all set for the shady deal, however, this time to take over the whole company. Experts say that this is an attempt by the management of TRG Pakistan to keep itself in place as the share price of TRG Pakistan has collapsed while the business has incurred huge losses of over Rs 30 billion and its principal subsidiary Afiniti Limited has declared bankruptcy.
TRG Pakistan has refused on a number of occasions to hold board elections which are been overdue since January 14, when the term of the present board expired. Greentree filed a suit in the Sindh High Court seeking delay in elections until after it acquired a controlling interest, but the Sindh High Court refused to stop the elections.
The Islamabad High Court’s injunction has created a new debate as the brokerage community that had been advising clients to accumulate a position with the view of making a quick return.
That is no longer possible given the court’s orders. The market now seems to believe that the Greentree transaction will not take place, with the shares trading at a 20pc discount to Greentree’s offer price of Rs75 per share.
TRG Pakistan and Greentree are taking the position that the Greentree acquisition will bring $50 million in investment to Pakistan. However, experts say that Greentree’s purchases were occurring through an SCRA account.
This meant that no dollar was actually coming to Pakistan and that the funds would be repatriated back to Bermuda when Greentree ultimately sold its shares.
Recently both sides claimed victory in an arbitration decision in the United States, with TRG Pakistan’s management stating that Mr. Chishti had violated his contract with TRG Pakistan by pledging certain of his shares, while Mr. Chishti stated that the arbitration decision gave him the right to freely sell over 90% of his shares.
All eyes are now on the Securities and Exchange Commission of Pakistan and on the Competition Commission of Pakistan who are required to provide their responses to the Islamabad High Court, which has set a hearing for March 13th.
