Five bids received for PIA sell-off

ISLAMABAD:

Pakistan's wealthiest and well-connected business groups with interests in cement, power, fertilizer and real estate sectors have shown interest in acquiring the loss-making Pakistan International Airlines, raising prospects for the success of the second attempt to privatize the entity.

The country's leading business groups, the Lucky Cement, Arif Habib conglomerate and Hub Power have come forward to bid for the acquisition of a majority of stakes of the Pakistan International Airline. Among the interested parties is Fauji Fertilizer Company, the military's commercial venture and Bahria Foundation, which is owned by Pakistan Navy.

According to a statement issued by the Privatisation Commission on Thursday, five parties have submitted both the expression of interests and the statement of qualifications till the extended deadline.

Most of these parties are resource rich and are having right connections, raising prospects for a healthy competition.

Our objective is to pass on the PIA to a consortium, which can make it a truly global profitable organization, said Muhammad Ali, the Advisor to Prime Minister on Privatisation on Thursday.

Privatisation Commission had invited the expression of interests for divestment of 51 to 100 % share capital of PIACL together with management control. It is the second attempt to privatize the airline after the first bid failed last year.

The Commission said that eight parties had shown interest but five of them submitted the statement of qualification. The AKD group, Habib Rafique Engineering and Sardar Muhammad Ashraf D. Baloch (Pvt.) Limited did not submit the statement of qualifications.

The Commission further stated that among the parties that submitted both the mandatory documents is the consortium comprising Lucky Cement Limited, Hub Power Holdings Limited, Kohat Cement Company Limited and Metro Ventures (Private) Limited. This consortium comprises some of the wealthier business individuals.

The second consortium comprises Arif Habib Corporation Limited, Fatima Fertilizer Company Limited, City Schools (Private) Limited and Lake City Holdings (Private) Limited.

The Fauji Fertilizer Company Limited has also submitted documents after months of speculation that the military's commercial venture was keen to acquire the airline.

The other two parties are Air Blue and a consortium comprising Augment Securities & Investments (Private) Limited and Serene Air (Private) Limited, Bahria Foundation, Mega C&S Holding, Equitas Capital LLC.

The SOQs submitted by the parties will be evaluated by the Privatisation Commission against the prequalification criteria and the prequalified parties will proceed to the next stage where they will be given access to the virtual data room to undertake buy-side due diligence, according to the Privatisation Commission.

Muhammad Ali said that due to improved finances and other developments, the PIA's balance sheet and the minimum reserve price would be revised.

During the last attempt, the government had set the minimum price at Rs85.03 billion with Rs45 billion negative balance sheet. Now, the government has taken out more debts from the balance sheet, which should positively impact the minimum price.

PIA's bidding is now expected to take place in the last quarter (October-December) of this year, said Muhammad Ali, the Adviser to the Prime Minister on Privatisation.

The first attempt to privatise PIA in October last year failed because the government ended up with only one bidder. Two other bidders backed out due to disagreements over tax waivers and clearing the remaining balance sheet.

Prime Minister Shehbaz Sharif's government has not been able to privatize a single entity during its first year in power. The government has again set a very modest target of generating Rs85 billion from privatisation proceeds in the next fiscal year.

The International Monetary Fund has allowed Pakistan to waive off 18% sales tax on lease of the aircraft and take out Rs45 billion liabilities from the PIA balance sheet before its privatisation. The opening of European routes is considered as major incentives for the success of the second bid on the privatisation, although the United Kingdom route still remains closed.

The Privatisation Advisor said that the commission was happy with the interest and seriousness shown by the potential bidders. He said that all the outstanding issues would be resolved and the transaction is expected to be closed within this calendar year.