Zhejiang Xinao Industry, a Chinese company has acquired 12.7% shares worth 7.6 million in Masood Textile Mills a vertically-integrated textile manufacturing company with in-house yarn, knitting, fabric dyeing, processing, laundry and apparel manufacturing facilities in a privately negotiated deal, members of the Karachi Stock Exchange (KSE) learned on Friday.

The deal follows a similar privately negotiated deal carried out in December last year when another Chinese company, Shanghai Challenge Textile had acquired 24.3% shares worth 14.5 million in Masood Textile Mills which constituted roughly one-fourth of the total shareholding of the Faisalabad-based company.

The company’s free float – shares that are readily available for trading on the stock market – currently consists of 10.1 million shares or 16.9% of the company’s total outstanding shareholding. The share price of Masood Textile Mills dropped 0.34% to Rs146.5 on Friday.

It is the first-of-its-kind deal in Pakistan in which two Chinese companies have acquired stakes in a listed Pakistani textile company. Besides the duty-free access to the European Union under the GSP Plus status, the Chinese investors will have the advantage of better cotton prices and cost-effective labour by investing in a Pakistani company.

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.

Masood Textile Mills was in talks last year 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 for which they had received 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.