Hubco: From a foreign to a local company

The last foreign shareholder looks to offload shares while Dawood Group and Allied Bank vie for stake.

KARACHI:

The board room of Hub Power Company (Hubco) – the country’s largest independent power producer – is likely to see a change of directors with international shareholders offloading stakes and local giants grabbing it.

Another major foreign shareholder, the National Power International Holdings BV has decided to sell its entire stake, with total shareholding of 17.44% in the company.

Dawood Group and Allied Bank Limited will be the major buyers with their proposed acquisition breakup of 171 million shares and 31 million shares, respectively, at an indicative price of Rs31 per share – this is subject to regulatory approvals, according to an InvestCap research note.

The total value would stand at $68.8 million when calculated at Rs91 exchange rate, adds the note. After disposition of its shareholdings, the final straw of foreign holding will be gone from the company.

Xenel Industries of Saudi Arabia sold its all holdings of 140 million shares back in October 2011 at a price of Rs37 per share, which converted into $60 million outflows.

The proposed sell-off would be more like a change of hands from a foreign investor to local groups, therefore, there should be little or no fear of increased pressure as far as company’s stock is concerned, as local groups would also likely keep it as strategic long-term investments, says the note.

Hubco’s free float – the number of shares available in the stock market – is as high as 80% in the market. The company is listed on Luxemburg Stock Exchange through global depository receipts other than local bourses.

The management of the company and the main composition of the directors on Hubco’s board are expected to be transferred to Dawood Group, Fauji Foundation and the Ibrahim Group of Allied Bank, as these shareholders make up to 43.1% of the shareholdings.

The election of the board of directors is scheduled in September 2012. Dawood Group and Ibrahim Group are one of the top business groups in the country with presence in many industries. Dawood Group has businesses in fertilizers, chemicals, power, foods, insurance and gas distribution while Allied Bank (Ibrahim Group) has the experience of running fibre and leasing businesses coupled with high acumen in the commercial banking, with Allied Bank being one of the top five banks in the country.

The new management is expected to be even better as the new groups already possesses a very successful track record in various forms of business, adds the note.

Published in The Express Tribune, March 27^th, 2012.