Privatisation process: Floor price of ABL set at Rs105 per share

Govt to offer 11.3% stake in bank, process of Heavy Electric Complex sale also begins.

ISLAMABAD:

The Privatisation Commission Board (PCB) on Tuesday decided to start afresh the process to privatise Heavy Electric Complex (HEC) and also fixed a minimum selling price at Rs105 per share to offload 11.3% of government’s stakes in Allied Bank Limited (ABL).

After the board meeting, the  cabinet committee on privatisation also endorsed the floor price of Rs105 per share, giving 7.6% discount on the last trading session’s price.

Headed by its chairman, Mohammad Zubair, the board decided to invite fresh bids for the strategic sale of HEC after the two bidders did not deposit the earnest money. The government was hoping that it would at least achieve the goal of one strategic sale this year amid criticism over divestment of shares of profitable entities.

The Board had earlier approved the divestment of a minimum 96% government shares in HEC together with management control. The government was expecting to complete the transaction by mid-December.

The board also relaxed the conditions of having related background in manufacturing of power transformers and minimum paid-up capital for the potential HEC bidders.

“The availability of finances is more important than the minimum paid up capital requirement,” said Zubair. He said the conditions have been made more conducive for potential bidders, which will help in getting more response.

Five companies pre-qualified for the HEC but three were screened out due to the conditions of relevant background and the minimum paid-up capital, said Zubair. These included ABB (Pvt) Limited, Switzerland; Areva T&D, France; Pak Elektron Limited (PEL), Siemens (Pak) Engineering Company Limited, Karachi; and Iljin Heavy Industries Company Limited, Korea. The government owns 96% shares of HEC and 4% shares are owned by the Employees’ Trust under Benazir Employees Stock Option Scheme (BESOS) Company. The HEC is engaged in the manufacturing of power transformers up to 40 megavolt ampere (MVA) – 132 kilovolt (Kv). The company also repairs and refurbishes old and damaged power transformers up to 500Kv.

It has six main manufacturing shops: machine, winding, insulation, core, fabrication and assembly. The company has an oil purification unit and a high voltage test laboratory equipped with overhead travelling cranes.

Last year, the HEC sustained Rs11 million losses. The company’s total assets were estimated at Rs1.72 billion while its total liabilities were Rs534 million in 2013, according to fact sheet of the company available at the Privatisation Commission website. The HEC’s accumulative losses were estimated at Rs280 million.

ABL divestment

The PCB also approved the floor price at Rs105 per share to off-load the remaining 11.23% government shares in the Allied Bank Limited (ABL). It approved 7.6% or Rs8.7 per share discount on the closing share price of the ABL on Tuesday. The ABL shares fell 2.84% over Monday’s trading and closed at Rs113.69 per share. At this minimum price, the government is expected to raise Rs13.8 billion.

The government is offering 131.3 million Ordinary Shares representing 11.3% of the total paid up share capital of ABL. It will be the third capital market transaction by the PML-N government. Earlier, it earned Rs38 billion including foreign exchange of over $310 million by selling shares of United Bank Limited.

Through one of the largest ever domestic secondary public offering, the government divested 5% of its shareholding in Pakistan Petroleum Limited and raised Rs15.3 billion in the process.

The book building for divestment of ABL’s shares will begin on Wednesday (today) and continue till Thursday. The government has offered shares to both international and domestic institutional investors, high net worth individuals and general public through the Karachi Stock Exchange (KSE) book building system.

After the close of book building, the strike price will be determined via the Dutch Auction Method as envisaged in KSE book-building system, according to the Cabinet Committee on Privatisation’s decision.

Published in The Express Tribune, December 10^th, 2014.

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