Merger and acquisition: Foreign firm shows interest in Meezan Bank

Targeting 49% shares in the largest Islamic bank in the country.


Kazim Alam November 19, 2013
Anticipation: 25% to 30% is the premium Meezan Bank’s shares may fetch. CREATIVE COMMONS

KARACHI:


A British Virgin Islands-based company has expressed interest in acquiring 49.1% shares in Pakistan’s largest Islamic bank, according to a notice sent to the Karachi Stock Exchange on Tuesday.


Vision Financial Holdings has appointed KASB Securities, a Karachi-based investment bank, as the manager to the offer for the acquisition of a significant chunk in Meezan Bank.

Speaking to The Express Tribune, Alternate Research investment analyst Umesh Kumar said he expects the deal to be finalised at a price of Rs47-Rs50 per share, which translates into a premium of 25%-30% over the current share price of Meezan Bank. Therefore, if the transaction takes place, its total size will be around $214-$230 million, he said.

However, other analysts shied away from stating the expected size of the transaction, saying it is too early to predict.

Meezan Bank has issued a little over 1 billion ordinary shares at the face value of Rs10 each. The potential acquirer has shown interest in buying 492.4 million shares, which is equal to the current shareholding of Noor Financial Investment Company in Meezan Bank.

Other major shareholders in Meezan Bank are Pakistan-Kuwait Investment Company (30% stake) and Islamic Development Bank (9.3%). Free-float of the bank constitutes 10% of the bank’s total shareholding structure.

Kumar said the transaction can possibly be carried out in two phases. It may first try to buy stakes from the current sponsors of the bank, which can be followed by a tender offer made to the general public, he added.

According to Topline Securities research analyst Zeeshan Afzal, the Substantial Acquisition Law 2002 states that a potential acquirer has to issue a public offer to the shareholders if it tries to acquire 25%-50% holding in a company.

Responding to a question about the origin and shareholding structure of Vision Financial Holdings, Afzal said the very purpose of maintaining a ‘registered office’ in British Virgin Islands is to stay away from the media limelight by taking advantage of local corporate laws.

However, if carried through, this will be the first-of-its-kind transaction in Pakistan where an obscure company with an unknown history acquires a huge stake in the leading player of Pakistan’s Islamic banking industry.

“We don’t recall any transaction [in Pakistan] in which a company registered in British Virgin Islands was involved,” Afzal remarked.

Bank’s fair value

Kumar believes the fact that the bank’s stock is currently trading on the Karachi bourse at a premium is entirely justified due to the bright prospects of Islamic banking in Pakistan and Meezan Bank’s role as its largest player.

At the end of trading on Tuesday, the stock price of Meezan Bank was Rs40.42 a share after increasing Rs1.92 during the day. For the quarter ended September 30, the bank posted a profit after tax of Rs943.9 million, up 15.2% from the corresponding period last year.

“Therefore, the fair value of the bank is approximately $380 million based on its current share price,” Kumar added.

Published in The Express Tribune, November 20th, 2013.

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COMMENTS (22)

shaukathussain | 7 years ago | Reply

Vision financial is a cover company for people mega-forbes owned by habib khan - where he got the money from is another story

Shamsi | 7 years ago | Reply

@S S: Its Mega & Forbes, they have created an SPV in British Virgin Islands, similar to the one created for the acquisition of Pioneer Cement

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