Arif Habib, MCB units all set to merge

Arif Habib Investments (AHI) and MCB Asset Management to merge, AHI to set up counters at MCB Bank branches.

KARACHI: Arif Habib Investments (AHI) and MCB Asset Management are to merge and a formal shareholder agreement will be signed in the coming days, AHI Chief Executive Nasim Beg said on Tuesday.

Explaining the rationale behind the deal, Beg told The Express Tribune that the company “wants to enhance its ability to reach investors as the interest among public for mutual funds is growing.” He added that the merger would allow AHI to utilise the widespread branch network of MCB Bank because instead of setting up separate outlets for the funds, the company will set up counters at branches where qualified staff can interact with existing and potential clients.

He believed that the bank is well positioned to complement the services offered by the asset management companies due to its presence in relatively affluent markets of the country. He said that the net asset base of AHI and MCB Asset Management stands at about Rs13 billion each, adding that the combined entity would boast a hefty asset base of Rs26 billion.

He explained that a meeting of shareholders will be called for final approval of the deal, which will be followed by legal proceedings. Beg stressed that the combined entity will become the second largest fund in the country after the National Investment Trust (NIT).

Two funds converted

According to an official release issued on Tuesday, AHI has converted its Pakistan Strategic Allocation Fund (PSAF) and Pakistan Premier Fund (PPF) from closed-end schemes into open-end ones.

Closed-end funds issue a finite number of shares in an initial public offering and after investors have bought them, they can only sell them on the open market not back to the fund. On the other hand, open-end schemes can be redeemed from the issuer at any time.

“During the last market crisis, there were many people who had invested in closed-end funds and when they went to redeem their funds they received peanuts for their holdings,” explained Beg, adding “we want to make sure that investors have a safe way of exiting the fund whenever they want to instead of having to sell their holdings at a significant loss in the market.”

He pointed out that the company had previously converted its Pakistan Capital Market Fund (PCM) “into an open-end scheme on November 22, 2010 in the spirit of safeguarding the best interest of PCM unit holders.”

Steel, cement and REITs

Aisha Steel, a local steel sheet manufacturing facility, will be up and running by mid-2012, revealed the AHI chief executive. “AHI entered into a joint venture with MetalOne, which itself is a subsidiary of Mitsubishi, for the manufacture of steel sheets used in the construction of car bodies,” said Beg.

He explained that his company had initially entered into the agreement with a 25 per cent stake but that it has now increased its holding to almost 60 per cent.

He also revealed that AHI has acquired Al Abbas Cement and that the company will soon launch its Real Estate Investment Trust (REIT) with a 13-acre project on the outskirts of Karachi. “We are awaiting approval from the Securities and Exchange Commission of Pakistan for four separate REIT licences,” he said.

Beg explained that the company had earlier acquired Javedan Cement. That company’s cement manufacturing facility had been shut down but its land will now be used to develop ‘New Nazimabad City’. He added that investors will be able to invest in the project through the REIT and will earn returns from the proceeds on the sale of these properties.

Beg has expressed hope that the apex regulator will soon approve the licences so that the real estate project can be formally launched.

Subsidiary headed to US market

Fatima Fertiliser, one of the subsidiaries of Arif Habib Group of Companies, may be listed at the New York Stock Exchange (NYSE) in the coming months, official sources told The Express Tribune.

Meanwhile, Beg confirmed that “efforts are being made to launch American Depository Receipts (ADR) of one of the group’s companies.” The issue would allow institutional investors, such as mutual funds that invest at the NYSE, to trade in certificates holding title to the company’s shares.

Published in The Express Tribune, January 19^th,  2011.