The government is also considering selling more than 5% shares of the paid-up capital in the largest bank to a single buyer. ILLUSTRATION: JAMAL KHURSHID
The government is also considering selling more than 5% shares of the paid-up capital in the largest bank to a single buyer. The board on Wednesday decided to sell the remaining 41.5% of government shares through the book-building process. It abandoned the earlier plan to issue Global Depository Receipts in the London Stock Exchange as the government could not timely meet the regulatory requirements.
Headed by PC Chairman Mohammad Zubair, the board also authorised the commission to evaluate the bid filed by a single party for hiring a financial adviser after no other party came forward to become the adviser for the sell-off of Pakistan Steel Mills (PSM).
It also cleared three parties that will now bid for the privatisation of Heavy Electric Complex (HEC). The HEC will be the first strategic sale and the government is looking to generate Rs1 billion.
Habib Bank
The PC board approved the transaction structure for HBL, which was proposed by the consortium of financial advisers comprising Credit Suisse, Deutsche Bank, Arif Habib Limited and Elixir Securities.
The transaction structure envisages offering government shares to both international and domestic institutional investors and High Net Worth Individuals (HNWI) through an integrated international book-building exercise.
The shares will be offered through domestic stock exchanges, marketed and sold to international institutional buyers and HNWI through a document in compliance with the regulations of the US Securities Act.
The transaction structure also includes potential placement of a significant component of government’s shares to the multilateral development banks.
A total of 609.3 million shares will be split into two categories. As many as 250 million shares valuing $500 million will be sold as base shares through the book-building process. The remaining 359.3 million shares will be available under a Green Shoe Option to be exercised on the basis of investor demand and potentially for offering to multilateral banks, mainly the IFC.
It is the best market strategy in given circumstances, said Zubair while speaking to The Express Tribune.
The financial advisers also proposed to waive the condition of acquiring not more than 5% of the paid-up capital of HBL. But Zubair said no decision has been taken in this regard and if the need arises, the concession could be requested from the State Bank of Pakistan and the Ministry of Finance.
HBL is the largest bank of the country in terms of assets, deposits and branch network. Its assets are valued at Rs1.74 trillion and customer deposits are estimated at Rs1.42 trillion.
The government is targeting to complete the transaction before the end of next month. Based on the closing share price of Rs211.53 on February 2, the government is aiming to earn Rs129 billion from the deal.
Pakistan Steel Mills
The PC board also allowed the commission to evaluate the technical and financial bid of the consortium led by Pak China Investment Bank and included Grant Thornton Consulting (Private) Limited, Tyazhpromexport, RIAA Law and AASA Consulting to privatise Pakistan Steel Mills.
The PC received a single bid as no other party came forward to become the financial adviser for carrying out the transaction that according to Zubair is ‘politically sensitive’.
The board took the decision after getting legal opinion given by Aziz Nistar, member of the PC board and senior legal consultant Dr Kabir Sidhu.
The chairman argued in the meeting that companies were reluctant to show interest as financial advisers for PSM privatisation due to its history, especially political implications and Supreme Court’s verdict on its previous privatisation.
Heavy Electrical Complex
The PC board also permitted three parties to take part in the acquisition of 97% government shares in Heavy Electrical Complex. These parties are Elahi Electronics (Elahi Group of Companies), Fauji Fertilizer Company and Cargill Holdings Limited.
Published in The Express Tribune, February 5th, 2015.
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