Approval: Deal sealed to sell govt’s remaining UBL stake

First privatisation transaction concludes in eight years.

ISLAMABAD:

The federal government on Thursday sealed a deal to sell its remaining 19.8% stake in United Bank Limited (UBL) for $387 million or Rs38 billion, concluding the first privatisation transaction in the eight years.

The Cabinet Committee on Privatisation (CCOP) approved the strike price of Rs158 per share to off-load the government’s remaining 19.8% or 241 million shares in UBL, according to an official announcement by the Ministry of Finance and Privatisation. The CCOP is headed by Finance and Privatisation Minister Ishaq Dar.

UBL is already in private hands and the government was earning modest yearly dividend of Rs28 million.

The government had set floor price at Rs155, giving 9% discount over the previous day trading, said Privatisation Commission Board Chairman Muhammad Zubair while addressing a press conference. He said the final offer was Rs3 per share higher than the floor price, yielding additional $7.2 million.

Zubair said 9% discount was reasonable after the UBL share prices phenomenally grew in last six months. He said there was an unprecedented interest from both domestic as well as foreign buyers and the UBL deal was oversubscribed by almost two times.



UBL’s share fell 4.2% during Thursday’s trading and closed at Rs170.2, still higher than the strike price.

Zubair said out of $387 million, the foreign equity funds bought 81% shares for $311 million. It was the biggest capital market transaction after 2003 HBL capital market deal when the government raised Rs12.4 billion, he added.

To a question, Zubair said UBL has been the best dividend yielding enterprise for the government.

However, the deal is part of the government’s plan to privatise 68 public companies, including 10 banks, announced last year under $6.7 billion IMF programme.

He said foreign buyers including Morgan Stanley, Wellington, Templeton and others bought the shares. The government had to seek more than 30 exemptions from various regulatory agencies to complete the transaction, the chairman added.

Pakistan hopes to raise about $2 billion or Rs198 billion in privatisation revenue in the next fiscal year, commencing from July as it plans to sell shares in other profitable entities like Oil and Gas Development Company Limited (OGDCL), Habib Bank Limited (HBL), Allied Bank Limited and Pakistan Petroleum Limited (PPL), Zubair added.

Under the privatisation law, 90% of the privatisation proceeds have to be utilised for retiring public debt while the remaining amount should be used for poverty alleviation.

Zubair said HBL’s transaction has been planned for December and is expected to yield $1.2 billion. According to the budget books, the government received Rs75 million in dividend income this year.

The OGDCL transaction is expected to be completed in September that will fetch about $850 million, said the chairman.

To a question, Zubair said that in case of loss-making entities like Pakistan Steel Mills, Pakistan International Airlines (PIA) there were serious political, labour, employees’ rights and post-privatisation challenges.

But he said the government was determined to privatise these entities and the PIA’s financial adviser will be hired this month, while PPL’s capital market transaction will also be completed within this month.

With this successful deal the international and domestic investors’ confidence in the economic policies of the government has been increased, said Dar.

Published in The Express Tribune, June 13^th, 2014.

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