Shanghai Challenge Textile Company, a Chinese company purchased 14.6 million shares of Faisalabad-based company Masood Textile Mills, which constitutes 24.3% shares roughly one fourth of the total shareholding in a privately negotiated deal. It is the first-of-its-kind deal in Pakistan in which a Chinese group has acquired a majority stake in a local textile company, members of the Karachi Stock Exchange (KSE) learned on Monday.

The Chinese investors besides the duty-free access to the European Union under the GSP Plus status will have the advantage of better cotton prices and cost-effective labour by investing in a Pakistani company.

The financial results of the company released on Monday included under the head ‘any other information’, the appointment of Miss Chen Yan, a nominee of Shanghai Challenge Tex¬tile Company Ltd, Shanghai, Peoples Republic of China as the new director, in place of Shahid Iqbal who resigned.

Masood Textile Mills was in talks with another Chinese group – Shandong Ruyi Science and Technology Group along with Shahid Nazir Ahmad and Nazia Nazir – for the sale of its majority shareholding.

It had received the approval from the Competition Commission of Pakistan (CCP) along with a separate approval from the Ministry of Commerce of China to go ahead with the acquisition. But the deal fell apart on September 30 when potential acquirers withdrew the public announcement of their intention to acquire up to 52% shares of Masood Textile Mills for undisclosed reasons.

Masood Textile Mills is a vertically-integrated textile manufacturing company with in-house yarn, knitting, fabric dyeing, processing, laundry and apparel manufacturing facilities. It posted a pre-tax profit of Rs1.1 billion in 2013, which was 13% higher than its pre-tax earnings in the preceding year. It produces value-added textile products , whose exports to the European Union (EU) are expected to increase due to the GSP Plus status that Pakistan has received.

While, Shanghai Challenge Textile Company Limited is a principally engaged in the production and distribution of high-graded outdoor fabrics and apparels. The Company operates its business through weaving, dyeing and processing of knitted fabrics, as well as the production and distribution of apparels, accessories and specialty textile products. It is also involves in the operation of domestic self-owned outdoor sports brand, named Kroceus (KR), as well as overseas self-owned apparel brand, named Super Natural (SR). The Company distributes its products within China domestic market and to overseas markets.