Business

Saudi group acquires Pakistani company for Rs2.5 billion

Its offer for 88% shares was Rs871 million higher than second highest bidder

Shahbaz Rana August 12, 2015

NPCC in 2014 Rs128m net profit after taxation Rs6.6b total assets Rs1.8b net equity. STOCK IMAGE

ISLAMABAD:

Mansour Al Mosaid Limited Company has acquired 88% shares in its rival National Power Construction Corporation (NPCC) at a cost of Rs2.5 billion, which is Rs530 million higher than the minimum price set by the government.

The divestment of government’s stake in NPCC marks the beginning of strategic sale of state-owned enterprises after a gap of 10 years.

The Cabinet Committee on Privatisation (CCoP) also gave approval to the Rs2.5 billion bid price, allowing the Privatisation Commission to issue the letter of acceptance to the bidder.

Saudi Arabia-based Al Mosaid Group’s bid was also Rs871 million higher than the second highest offer made by the consortium of Habib Rafiq Limited and Frontier Works Organisation that valued the shares at Rs1.63 billion or Rs925 per share.

Read: Privatisation of NPCC: Minimum reference price set 12% higher

The third bidder, a consortium of Zahir Khan Brothers and Reliable Engineering Limited, offered Rs606.3 million or Rs344.5 per share.

The CCoP had set the minimum reference price at Rs1,119 per share or Rs1.969 billion for the 88% stake in NPCC, which is engaged in the business of engineering and construction.

After receiving the letter of acceptance, the bidder will have one and a half months to pay the dues and enter into a sale-purchase agreement. The Al Mosaid Group priced the NPCC share at Rs1,420, valuing the company at Rs2.84 billion. The price offer was slightly higher than the expectation of Finance and Privatisation Minister Ishaq Dar, who hoped that the bid would touch Rs1,400 per share.

The sealed financial bids of the three bidders were opened by the representative of media persons. “This is an evidence of transparency in the bidding process,” said Privatisation Commission Chairman Mohammad Zubair.

The bids of the other two consortia were below the reference price.

“There is nothing better than a Saudi company acquiring a Pakistani firm,” said Zubair, after finishing the open bidding process. He said the company would bring $24.5 million.

The government had offered 1.76 million shares for acquisition. The remaining 12% or 240,000 shares are in the hands of employees of the company under the Benazir Employees Stock Option Scheme.

Mansour Al Mosaid Company is a direct competitor of the NPCC. Both the companies have the same nature of business. The acquisition will strengthen businesses of the Al Mosaid Group as with the purchase, the group has also won the clients of NPCC.

The Al Mosaid Group’s net worth is Rs4.94 billion and has a workforce of 4,000 including 2,700 employees of Pakistani origin.

NPCC is a profitable enterprise and in fiscal year 2014, it earned a net profit of Rs128 million. Its total assets grew to Rs6.6 billion in the year while liabilities stood at Rs4.8 billion, leaving a net equity of Rs1.8 billion. The company has been giving out regular dividends to its shareholders.

It will be the first strategic sale in the last 10 years, said Zubair, who was desperately looking for a success story after cancellation of the sale of Heavy Electrical Complex. Because of lax due diligence by the commission and allegedly shabby background of the HEC buyer - Cargill Holdings Limited, the HEC deal was scrapped.

Read: Saudi opens first privatised airport for pilgrims

Zubair said the NPCC privatisation would provide a boost to the upcoming big sales including Pakistan International Airlines, Pakistan Steel Mills, Kot Addu Power Company and Faisalabad Electricity Supply Company.

Published in The Express Tribune, August 12^th, 2015.

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COMMENTS (22)

just_someone | 8 years ago | Reply @someone: read the article again: "Its total assets grew to Rs6.6 billion in the year while liabilities stood at Rs4.8 billion, leaving a net equity of Rs1.8 billion."

Demril Shaikh | 8 years ago | Reply @mahakaalchakra: India is good for nothing......paranoid country is jelous now

VIEW MORE COMMENTS

Bewildered | 8 years ago | Reply How about privatizing, rather handing over for a fee, the entire GOP back to Britishers. I am sure they will run our government much more efficiently, effectively, honestly, and for the betterment of ordinary citizens than we ever did on our own. Just thinking.

kashif | 8 years ago | Reply Absolutely shocking.

globalobserver | 8 years ago | Reply @riz: "good price fatched" Rs. 2.5B is equal to $25 Million. Is that really a good price?

Mera Watan Pakistan | 8 years ago | Reply Is it really in the favor of "National" interest to privatize a profitable/profit earning organization which has increased its assets in worth of 6.6 billion and giving out regular dividends to share holders !! One privatize organizations which the "Owner" fail to run properly in a professional manner and which produces, only losses at the expense of tax payers. Why not PIA, PR and other such organizations has been privatized up till now? merely because this step probably not go in the favor of powerful & damn wealthy politicians ruling the country and where the Nation is suffering from Inflation and Mehngai.

Ali Khan | 8 years ago | Reply NOTHING and absolutely Nothing can make me trust a PM whose businesses are offshore, whose finance minister is an on record money launderer and who supports a resigned look with a fake smile even while he sleeps. People of Pakistan shouldn't be surprised few years from now when they will finally discover that even their underpants have been sold to some convenient bidder from a habibi country

asim | 8 years ago | Reply PTCL sold 7 years back still amount pending with etisalat; if PMLN is so desperate for money 1st they should recover this money which is now 4-5 billion dollars now.

Ch. Allah Daad | 8 years ago | Reply @mahakaalchakra: These are tangible assets and real businesses, therefore they cannot be moved out of Pakistan. Private organizations will manage them better and would make them profitable. Only problem is that government and its stooges will lose their authority to destroy them further. Its not government's job to do business. Our tax money should never be spent to support business entities such as Railway, PIA, Steel Mills and other commercial organizations. If they cannot even break even, they should be privatized.

Pakistan's Admirer From India | 8 years ago | Reply @Usman: Privatization, is always in the interest of the country, Saudi's will have to hire domestically, having expats will only increase costs, but will a well managed organization the profits, level of service and thus employment will only increase. A step in the right direction

Usman | 8 years ago | Reply They allowed a Saudi company to eliminate competition Pakistan, are they our of their minds? What sort of commitments did they secure from the Saudis to invest in Pakitsan and to create jobs here, not in KSA? Or did they just have the price of the sale in mind?

SAJAD | 8 years ago | Reply Company valued at 22 times of net earnings. This is huge even for Saudi Companies operating in Saudi Arabia. the Maximum in private equity transactions related to power generation & infrastructure is 7-10. There is a huge & urgent need for changeover of transmission line in Pakistan & acquiring a rival means there would be ease of winning tenders even with higher prices. Still this price is very very high & huge margin between the second runner up.

M | 8 years ago | Reply The government fetched a pretty good price, almost 1.4 times the book value of the Company. Plus, with the onset of reduced development spending by Saudi government due to the prevailing oil crisis, NPCC's profitability would have taken a major hit since majority of its business is in Saudi. Good decision by the government to offload this asset, which unfortunately never lived up to its potential.

Abdul Qayoom | 8 years ago | Reply It is out of my mind, why Govt is going to sale "Profitable Organization" ?

Pankaj | 8 years ago | Reply Electricity is common need of nation and selling its 88% share to one party and to be precise foreign party is not in favour of national interests. National assets like electricity, road, railways, agricultural activities etc. directly impact common man from bottom to top. Its ownership should always remain with government while maintenance and distribution can be privatized. Businesses like airlines, manufacturing etc. could be privatized completely as these have minimal impact on common needs and should be left for business purpose. (Don't take my comments as comments from an Indian against Pakistan, I just presented my views).

Pakistani Sindhi | 8 years ago | Reply @mahakaalchakra: My friend your comment is not topical or even close to be called critically-topical. That's called privatization in business-language, certainly not the 'sale'. Moreover, you fail to understand the national patterns on negotiation that follow in the process of the said issue. You may as an outsider criticize such moves but that does not mean you have a thorough knowledge on the whole subject (... in case you might question my know-how, actually I have done studies on the privatization and the rules which follow in the due process)

noone | 8 years ago | Reply @someone there is a thing called liabilities... if you can read the article carefully before commenting, that would be helpful

someone | 8 years ago | Reply How can a company be sold for 2.5 billion PKR when its total assets are around 6.6 billion PKR with net profit for 128 million PKR. Does NPCC has too much debt on it?

Sheraz Khalid | 8 years ago | Reply @Abreez. I second you.

mahakaalchakra | 8 years ago | Reply Pakistan is on sale; roads and ores to Iron brother, factories to Saudi king and banks to UAE sheikhs.what else is left? Education to Madaris from Wahabis and military works on Coalition Security Funds in Billions from USA for acting against those who are enemy of Pakistan. What next?

riz | 8 years ago | Reply good price fatched

abreez | 8 years ago | Reply Zubair said the NPCC privatisation would provide a boost to the upcoming big sales including Pakistan International Airlines, Pakistan Steel Mills, Kot Addu Power Company and Faisalabad Electricity Supply Company and ultimately GOP. And it may surprise people of Pakistan that everyone, Chinese, US, UK, Russia, Saudi, Turkey, etc., etc. very interested in GOP and when we will hold bidding ceremony of GOP we will receive record per share bid for GOP.

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