Book building: Floor price set at Rs216 for OGDC shares

Government offering 10% of its stake in company, final price likely to be announced on November 10.

KARACHI:

The board of the Privatisation Commission (PC) and the Cabinet Committee on Privatisation have approved the floor price of Rs216 per share with respect to the offer for sale of 311.1 million shares in Oil and Gas Development Company (OGDC), a notice to the Karachi Stock Exchange (KSE) said on Thursday.

OGDC informed members of the stock exchange that the final price for the OGDC shares will likely be announced on November 10 after the completion of the ongoing book-building process.

The government is offering 10% of its stake in OGDC to secure the next $1.1 billion tranche of the International Monetary Fund (IMF) loan. The offer for sale of shares represents 7.5% of the total paid-up capital of the company.



Currently, the government and OGDC Employee Empowerment Trust hold 75% and 10% shareholding, respectively. The rest of the 15% shareholding constitutes the company’s free-float on the KSE.

The government will still own 67.5% shares in OGDC in the proposed post-offer scenario. The company’s free-float will increase to 22.5% post-offer while the shareholding of OGDC Employee Empowerment Trust will remain 10%.

Speaking to The Express Tribune on Thursday, Topline Securities CEO Mohammed Sohail said the government expects to raise as much as $700 million from this transaction.

Ahead of the expected increase in the company’s free-float, the share price of OGDC has declined 11.5% since October 1. Its share price closed at Rs221.60 after losing Rs8 on Thursday.

The transaction is meant for meeting the government’s budget financing needs and supporting the country’s foreign currency reserves position. Foreign exchange reserves held by the State Bank of Pakistan stood at $8.6 billion at the end of October.

According to PC Chairman Muhammad Zubair, the share price of OGDC has gone down recently because of a reduction in crude oil prices in the international market.

The offer for sale of shares consists of two stages, namely book-building and general public portions. The ongoing book-building process following the announcement of the floor price represents 96.5% of the offer. Only institutional investors and high net worth individuals, who are able to place a bid of at least Rs1 million, can participate in the book-building process.

The book-building process will result in the strike price that will be determined through available demand for shares at different price levels. A public offer of 11.2 million ordinary shares will follow the book-building process at the offer price that will be equal or less than the strike price.

OGDC posted a profit of Rs28.3 billion for the July-September quarter, which was down 15.7% from the same quarter of the preceding fiscal year.

Published in The Express Tribune, November 7^th, 2014.

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