Chakwal Spinning Mills Limited (PSX: CWSM) has announced that its proposed merger with technology firm Khazana Enterprises (Private) Limited (KEPL) has not materialized. In a notice released to the Pakistan Stock Exchange (PSX) on Thursday, CWSM outlined the timeline of events surrounding the memorandum of understanding (MoU) signed with KEPL on January 2, 2024, which was intended to explore a potential merger or acquisition. This MoU was initially set for a duration of 90 days and was disclosed to the public on January 9, 2024, following approval from the company’s board of directors.
As the due diligence process could not be finalized by KEPL, the MoU was extended by an addendum for an additional 60 days, making it valid until May 31, 2024. However, despite ongoing discussions regarding a draft agreement, the two parties were unable to reach a consensus before the MoU’s expiration, leading to the conclusion that a formal agreement for the merger would not be reached.
In light of this setback, CWSM has taken proactive steps to pivot its strategy. Following the expiration of the MoU with KEPL and the subsequent breakdown of negotiations, CWSM appointed OPTIMUS as Consultants/Advisors on August 15, 2024, to arrange funding for the company’s new business line focused on technology and cloud computing.
OPTIMUS secured a commitment of approximately Rs. 7.284 billion from PNO Capital Limited (PNO), with a Term Sheet signed on August 15, 2024. However, despite ongoing discussions, neither PNO nor OPTIMUS officially terminated the Term Sheet after the Securities and Exchange Commission of Pakistan (SECP) refused the proposed name for the new venture. In an email dated October 10, 2024, the CEO of OPTIMUS communicated that they would only engage further once all regulatory issues were resolved, indicating that there are currently no plans to move forward with the PNO engagement.
Adding to the uncertainty, the SECP’s Business Centre in Islamabad issued a letter on October 2, 2024, rejecting the name “Quantum Cloud & AI Technologies,” citing the expiration of the MoU with KEPL. This refusal raises doubts about the planned launch of CWSM’s data center and cloud operations in Pakistan, which were to be financed by PNO.
Despite these challenges, CWSM’s management remains resolute in their commitment to transforming the company into an IT-focused business. They expressed confidence in their ability to succeed in this new direction, emphasizing their dedication to the best interests of their shareholders. The notice concluded with an optimistic outlook for the company’s future endeavors in the technology sector.
