The merger of Industry Facilitation Centre (IFC) and Pakistan Industrial Development Corporation (PIDC) has hit a snag as shareholders are embroiled in a tug of war over the transfer of shares.
PIDC wants the shareholders to transfer shares with no profit or loss but two shareholders - Pakistan Steel Mills (PSM) and State Petroleum Refining and Petrochemical Corporation (PERAC) - have conveyed that the transfer of shares to PIDC may be made on the most preferred option of “fair market value”.
The Cabinet Committee on Institutional Reforms (CCIR) took up the matter in a recent meeting. The Ministry of Industries and Production told the meeting that IFC, incorporated under Section 32 of the Companies Ordinance 1984 on September 3, 1989, was a for-profit entity and declared dividend for its shareholding companies in the past.
PIDC has 56.8% shares and National Fertiliser Corporation (NFC) has 24.37% shares. Earlier, PSM had shareholding of 26.64% but it has now been reduced to 9.59%. PERAC has 8.52% shares and the Engineering Development Board (EDB), which originally had 7.43% shares, has 0.71% shares now.
The Ministry of Industries and Production informed the meeting that the implementation committee for re-organising the federal government, in its meeting held on October 8, 2019, had decided to merge IFC with PIDC. Later, the Cabinet Division conveyed that the federal government had approved the merger of IFC with PIDC.
The merger was discussed in two consecutive federal cabinet meetings held on February 6, 2020 and May 12, 2020. However, it has not yet materialised due to disagreement among shareholding companies on the transfer of shares to PIDC without consideration/ no-profit, no-loss basis as per demand of PIDC because of availability of other option/ choice for buying the shares at market value.
In order to resolve the matter, the Industries and Production Division secretary convened a meeting on September 15, 2020 with all stakeholders and it was decided that being state-owned enterprises, all shareholding companies should work out financial/ legal complications to highlight the impact of all possible options/ choices (fair market value, par value/ book value or transfer without consideration) for the transfer of shares to PIDC keeping in view the financial health of their respective organisations.
PSM and PERAC said that the transfer of their shares to PIDC may be made on the most preferred option of “fair market value”, while NFC and EDB agreed to comply with directives of the government.
However, PIDC was not willing to buy shares at the fair market value. PIDC requested that shares of other entities held in IFC may be transferred on a no-profit, no-loss basis/ without consideration.
The Ministry of Industries and Production placed the matter before the CCIR for reconsideration and recommendations regarding transfer of shares of other entities and approval from the cabinet.
During the ensuing discussion, the CCIR observed that the decision relating to the merger had already been taken by the committee.
The issue raised in the summary did not relate to the merger but it was a procedural formality to be completed as a result of the merger process. Therefore, such procedural matters may be settled in consultation with the Finance Division. The CCIR considered the summary submitted by the Ministry of Industries and Production and directed the ministry to resolve the issue in consultation with the Finance Division and submit a progress report to the CCIR within one month.
Published in The Express Tribune, November 19th, 2020.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
COMMENTS
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ