Minori inks deal with Dubai's Safa to sell Emerald Oil shares worth Tk400cr

• The deal also allows Minori to use Emerald shares as collateral for a loan from Safa if selling shares proves impractical
• As per the deal, shares will be sold at market price benchmarks in trenches
• Presently, Minori holds more than 39% of the Emerald Oil shares
• Minori plans to expand Emerald Oil with the foreign funds

Minori Bangladesh Ltd, the biggest shareholder of rice bran oil producer Emerald Oil Industries, has entered into a three-year share purchase agreement with Dubai-based Safa Capital, intending to sell its Emerald Oil shares totalling Tk400 crore.

However, if selling shares proves impractical, the agreement would enable Minori to use the Emerald shares it possesses as collateral to secure a loan from the foreign investor, said Miya Mamun, the chairman of Minori Bangladesh.

He told The Business Standard, "According to the agreement signed last week in Dubai, we would sell Emerald Oil shares to the foreign investor at market price benchmarks in trenches."

He mentioned that the anticipated foreign funds would be utilised to facilitate the envisioned expansion of the publicly traded rice bran oil producer, Emerald Oil. The company resumed operations after a six-year hiatus, with Minori taking charge from the defaulting sponsors who fled the country, abandoning the factory.

For instance, to acquire the original sponsor's 30% shares from Basic Bank, Minori would require funds to settle the defaulted loans of the sponsors, said Mamun.

He said Minori also plans to invest a portion of the anticipated funds in undervalued shares of listed companies in Bangladesh.

"This deal could serve as a valuable benchmark for the country's financial markets, particularly as stronger foreign currency inflows are needed," said Miya Mamun, a Bangladesh-origin Japanese entrepreneur who founded Minori Bangladesh and took over two struggling publicly traded food sector companies — Emerald Oil Industries and FuWang Foods— eying a turnaround.

Minori would pay Safa Capital 3% of the committed sum of Tk400 crore as commitment fees, according to the entrepreneur.

Agreement documents seen by TBS revealed that when the two parties agree on buying and selling Emerald shares, they would use the 15-trading days' average closing price as the benchmark. Additionally, they aim to trade approximately seven times the shares compared to the daily average traded during the reference period.

Presently, Minori holds more than 39% of the Emerald Oil shares, as the securities regulator granted approval a year ago for Minori to subscribe to 3.15 crore new shares at a face value of Tk10 each.

The new shares which are yet to be credited to Minori, now amounting to more than 30% of the total, are subject to a lock-in for three years and they will not be sellable in the next two years.

"Having the dividends disbursed, the new shares would be credited to our account," said Miya Mamun.

However, Minori can sell over 5% shares of Emerald Oil immediately, with public announcement, which it initially bought eying board seats.

"We will have the option to buy more shares from the market and sell them to the foreign investor," said Miya Mamun.

Securities regulations require a minimum shareholding of 2% for each shareholder director and a collective ownership of 30% by sponsors and directors.

Last month, Emerald Oil Industries obtained regulatory approval to use sponsor-director shares, exceeding the minimum regulatory threshold of 30%, as collateral for loans. Locked-in shares, constituting the mandatory holding of sponsor-directors, cannot be utilised as collateral for loans.

A roller coaster ride

Buying over 7% shares of the then-inoperative Emerald Oil Industries before the pandemic, Minori entered the board in 2021 eying production resumption. It did resume production and the company already started to make profits and pay dividends to shareholders.

However, according to Miya Mamun, the company's factory in the Sherpur district has been almost off production for the last one and a half months due to an acute shortage of gas.

The alternative husk boiler installed last year alone is not sufficient to cater to the demand for rice bran oil that was being extracted from rice bran at one unit and refined at another one, he said.

"We are in the process of importing a new husk boiler line, with coal as the primary fuel and husk as the secondary fuel to operate the factory," he said, expressing optimism about resuming production by mid-March this year.

Daily production capacity would be doubled to nearly four lakh tonnes a day, and that would be a fair volume to cater to the buyers, Miya Mamun said.

Emerald Oil shares, having a face value of Tk10, closed 3.87% higher at Tk75.2 apiece on the Dhaka Stock Exchange on Sunday.

Emerald Oil which started to have a market presence with its Spondon branded rice bran oil in 2011 went off production in 2017 following its original sponsors' loan scam.