Sell-off: PC approves structure to offload UBL shares

Simultaneous book building to be held for foreign and local investors.

ISLAMABAD:

The Privatisation Commission (PC) on Friday approved a transaction structure to offload the 20% remaining government shares in United Bank Limited through book building, moving a step closer to complete the transaction that is expected to fetch at least $400 million.

Headed by PC Chairman, Mohammad Zubair, the board decided to offer 160 million as base shares to both international strategic investors and local investors. In terms of volume, the government owns 241 million shares in the UBL.

The board decided that simultaneous book building will be conducted for both foreign and local investors, instead of separate ones.

Separate book buildings would result in two separate strike prices – the price fixed by the seller after receiving bids – which the government wants to avoid. “It is for the first time that the government will divest the shares through book building,” said Zubair.

After the board’s nod, the Cabinet Committee on Privatisation (CCOP), which is headed by Finance and Privatisation Minister Ishaq Dar, will meet on Saturday to approve the transaction structure.

The federal government has already sold 80.2% shares in UBL. General Pervez Musharraf’s government had raised Rs53 billion by selling UBL’s shares through three separate transactions, which were carried out from 2002 to 2007.

On Friday, UBL’s shares were traded at Rs172.47 – up by Rs1.23 from the previous day. On current value, the government is expected to raise Rs41.6 billion ($422.1 million). However, any change in the price of UBL’s share during the next three weeks will have implications on the strike price.

The PC has hired a consortium of Credit Suisse, Arif-Habib and Elixir Securities as financial advisers to offload 20% UBL’s shares.

“From Wednesday, the government will begin holding road shows in seven international cities; Singapore will be its first destination while Karachi is chosen as the last destination where road show will be held on May 25,”said Zubair

Zubair said given the size of the transaction, the PC was expecting that about 90% shares will be bought by the foreign strategic investors. “The Commission’s preference will be to sell the shares to foreign investors,” said Zubair.  “This is because it carries the bonanza of earning foreign exchange.”

According to Zubair, the shares will be sold on June 3.

UBL is one of eight entities that the government has picked for the first phase of privatisation. It is struggling to meet the deadline, particularly set for Pakistan International Airlines and Oil and Gas Development Company.

After conducting the road shows, the PC will again go back to CCOP for seeking approval of the floor price – the minimum price at which the government will allow the PC to sell the shares.

The government wants to raise money as part of non-tax revenues aimed at restricting budget deficit to 5.8% of Gross Domestic Product as part of the IMF condition. Under the law, 90% of the money raised through privatisation has to be utilised for retiring public debt and the rest of 10% on social sector.

Published in The Express Tribune, May 10^th, 2014.

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