Earlier, the government had approved the minimum price or base price of Rs155 per share for the offer. PHOTO: PPI/FILE
Book-building for divestment of the government’s stake in United Bank Limited (UBL) concluded late on Wednesday, with book-runners to the transaction receiving more than 200 bids in a show of strong interest from international and domestic investors.
At the time of filing this report, the strike price was yet to be arrived at and presented before Finance Minister Ishaq Dar around midnight. However, sources told The Express Tribune that book-runners estimate the headline demand to be in excess of the full deal size – ie oversubscription of the offer – at Rs158 per share.
Earlier, the government had approved the minimum price or base price of Rs155 per share for the offer.
The government is offloading its residual shareholding in UBL, which stood at 19.8% of the bank’s paid-up capital, through an offer for sale of shares to the public, including foreign and domestic investors.
A consortium of Credit Suisse Singapore, Arif Habib Limited and Elixir Securities Pakistan was appointed as lead manager and book-runners for the transaction.
The majority stakeholder in UBL is Bestway Group with 61.4% shares while other smaller stakeholders control 18.8% shareholding.
The government’s base offer consisted of 160 million shares representing 13.7% of the total paid-up share capital of UBL. But the high demand resulted in the use of the upsize option, thus allowing the government to offload an additional 81.9 million shares, representing 6.1% of the paid-up capital.
Assuming that the strike price is indeed Rs158 per share, the transaction will fetch the government Rs38.2 billion through the sale of 241.9 million shares (19.8% stake) in UBL.
Successful bidders will acquire the UBL stock at the strike price determined through the book-building process, which was used to gauge the demand for the UBL stock at different price levels.
Only institutional investors and high net worth individuals were allowed to take part in the book-building process.
According to KASB Securities, the offer size is substantial (almost twice the stock’s current free-float). “Therefore, this offer of 241.9 million shares represents a significant increase in supply (of the UBL stock),” it said in a research note issued earlier on Wednesday.
It added local mutual funds and banks were expected to participate strongly in the book-building process, as the latest fund managers’ reports of the country’s flagship stock funds showed only one fund had UBL among its top holdings.
“The strong price performance, along with an impending secondary market offering, may have driven the divestment. However, at the right price, we believe local investors will rebuild their positions,” it noted.
The UBL stock price climbed up Rs3.85 on Wednesday to close at Rs174.23 a share. Its share price has gone up 57%, or Rs61.80, during the last 12 months.
Published in The Express Tribune, June 12th, 2014.
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