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News & Press Releases
PADICO Holding Restructures Investments through the Largest Swap and Purchase Transaction in the Palestinian market in 2009
As part of its restructuring process that was
commenced in 2009, and in its attempt to establish specialized holding companies
in each sector, Palestine Development and Investment Ltd. (PADICO Holding) sold
its shares in Golden Wheat Mills Company (GMC) and National Carton Industry
(NCI) to Palestine Industrial Investment Company (PIIC). The transaction also
included selling Palestine Industrial Estate Development Company (PIEDCO
Holding) shares in GMC to PIIC.
This transaction resulted from the Board of PADICO Holding’s decision to
restructure its investments in the industrial sector and merge them under the
administration of PIIC, that functions as PADICO Holding’s industrial investment
arm in the sector.
PADICO Holding sold 1.4 million of its shares in GMC and approximately 1.2
million of its shares in NCI to PIIC. In addition, PIEDCO Holding sold its
approximately 1.32 million shares in GMC to PIIC. This resulted in PIIC becoming
the holder of 18% of GMC capital, and 24% of NCI capital.
PADICO Holding Restructuring Plan Follows Upon Strategic Vision:
Mr. Munib R. Masri, Chariman of PADICO Holding, considered these transactions to
be both a major and strategic stepping stone in reinforcing PADICO Holding’s
investments. According to Mr. Masri, the restructuring goal is exemplified in
the implementation of the Board’s plan to restructure Palestine Tourism
Investment Company (PTIC), that owns the Intercontinental Hotel in Bethlehem.
This restructuring process, that is comprised of two phases, will increase
PTIC’s capital to a value of JD 20 million, that subsequently enables PTIC to
repay its loans and inject working capital in future projects. The first phase
was completed via agreement with the Palestine Investment Fund (PIF), the Arab
Bank and other strategic partners, which raised PTIC’s capital by JD 5.3 million
with a subscription rate of 96%, which consequently enabled it to amortize its
loss of JD 24 million. By the end of January 2010, an extraordinary general
assembly meeting is planned for approval of the second phase, which involves a
capital increase of JD 14.7 million to repay PTIC’s long term loans especially
for the European Investment Bank (EIB), which has been a strategic partner of
PADICO Holding companies.
On another note, Mr. Masri said that the merger of PADICO Holding’s investments
in tourism and real estate is expected to be complete during the first quarter
of 2010. The merger is planned in three stages and combines 16 existing
companies to form a single holding company with capital exceeding USD 180
million. The new holding company will function primarily as PADICO Holding’s
investment arm in real estate and tourism. Mr. Masri added that a comprehensive
action plan is currently underway to ensure a strong boost for the new holding
company. Coordination efforts with stakeholders, mainly the Ministry of National
Economy and the Capital Market Authority, are still ongoing. Mr. Masri also
reasserted the positive impact of the merger on PADICO Holding, the Palestine
Securities Exchange (PSE), and the Palestinian economy as a whole.
Mr. Masri stated that PADICO Holding purchased the full share of Global
Investment House (Global) in Palestine Real Estate Investment Co. (PRICO), that
amounted to approximately 16 million shares at a total cost of USD 18 million.
PADICO Holding also acquired Global’s shares in PSE, that amount to 10% of the
capital at USD 5 million.
Mr. Samir Hulileh, CEO of PADICO Holding, said that the decision to swap and
purchase shares is attributed to PIIC’s success in managing other companies such
as the Palestine Poultry Company (PPC). PPC saw a rise in profits in 2009, while
the National Carton Industry (NCI) underwent many changes to improve performance
such as adopting plans for expansion, modernization and development of its
products including a new production line for packaging agricultural products.
NCI is therefore expected to achieve a substantial profit this year. As for the
Golden Wheat Mills Company (GMC), it has been realizing profits and is expected
to sustain such performance.
Mr. Hulileh added that the excellent results from PADICO Holding’s investment
restructuring, that began in mid 2008, are evidenced in the growth in profits of
its investments in 2009. He also stated that the restructuring process aims to
concentrate investments in specialized arms to cut down overhead costs and to
improve performance in order to enhance profitability. .
Mr. Nidal M. Sukhtian, Chairman of Palestine Industrial Investment Company (PIIC),
welcomed the deal that he said responded to PIIC’s strategy of seeking
investment opportunities in the industrial sector. Mr. Sukhtian added that
industry in general requires uniting efforts to increase the ability of
acquiring raw materials at optimal conditions, and also to promote marketing
opportunities by building networks for more effective distribution with higher
economic feasibility.
Mr. Sukhtian stated that PIIC was set up as PADICO Holding’s investment arm in
the industrial sector, which in turn established three companies in the
industrial and agricultural sectors. He stated that had it not been for the
difficult political and economic situation over the last decade, PIIC would have
invested in other industrial companies.
Mr. Sukhtian referred to the convergence between PIIC’s old and new investments.
Both the Palestine Poultry Company (PPC) and the Golden Wheat Mills Company
(GMC) purchase wheat as input for their products in animal feed and flour, while
the Palestine Plastic Industries Company (PPIC) and the National Carton Industry
(NCI) work in the area of packaging, focusing on agricultural and food products.
He stressed the positive impact this convergence will have on PADICO Holding and
its investments.
Mr. Abdel Hakim Alfuqaha, General Manager of Palestine Industrial Investment
Company (PIIC) confirmed the positive results that stemmed from its investments
in different affiliated companies, mainly in the Palestine Poultry Company (PPC)
, which realized unprecedented profits in 2009. Mr. Alfuqaha added that the
Return on Equity is expected to exceed 25% this year. PIIC has also begun to
implement an ambitious horizontal and vertical expansion plan that will
positively impact its performance starting 2010 and will promote its role as the
most important company working in the sector of animal breeding in Palestine.
Mr. Alfuqaha stated that PIIC will continue to provide technical and logistical
support for its investments in the industrial sector, especially after PIIC
expanded by buying up PADICO Holding’s shares in NCI and GMC. Mr. Alfuqaha also
said that the affiliates of PIIC share a common cost, which is that of raw
material that accounts for 80% of the total cost thus necessitating the
establishment of a new procurement department. Mr. Alfuqaha concluded by saying
that PIIC will work on upgrading staff capacity and concentrate on all of
marketing, purchasing and industrial management practices, as PIIC is convinced
in the importance of short and long term strategies for market expansion.
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