Finance Minister Ishaq Dar (L) chairing the meeting of the Cabinet Committee on Privatisation. PHOTO: PID
The Cabinet Committee on Privatisation on Tuesday deferred approval of the structure for sale of National Power Construction Company (NPCC), as the committee sought more information about the company’s financial issues.
However, there were also apprehensions that the employees of NPCC, who hold a 12% stake, may challenge the sell-off process in a court of law.
The CCOP, headed by Finance Minister Ishaq Dar, approved the transaction structure for divesting the government’s remaining 41.5% stake in Habib Bank Limited aimed at raising Rs129 billion before the end of the current fiscal year.
The HBL sale proceeds will be utilised to cover the tax revenue shortfall, surfacing as a result of the downward revision in the Federal Board of Revenue’s tax target from Rs2.810 trillion to Rs2.691 trillion for the current fiscal year 2014-15.
NPCC
The board of Privatisation Commission had recommended the strategic sale of NPCC, through offloading a minimum 88% shares. The consortium of financial advisers including MCB Bank and UBL has recommended the strategic sale of a minimum 88% shares in NPCC. The government is targeting to raise at least Rs2 billion.
The previous government of Pakistan Peoples Party had transferred the remaining 12% government shares in the name of a trust of NPCC employees under the Benazir Employees Stock Option Scheme (BESOS).
The PPP government had initiated the scheme to empower the employees of various public sector entities, by giving them 12% of government shares, free of charge, through a trust.
However, the scheme is currently being reviewed and a decision whether to continue or wind up the scheme is pending. The PML-N government wants to take back these shares from the employees but Prime Minister Nawaz Sharif has yet to take a decision.
HBL
The CCOP approved the transaction structure for HBL under which the government’s 41.5% stake in the country’s largest commercial bank would be sold.
The finance minister observed that all-out efforts should be made for securing the best price for HBL shares as it was a prime financial institution of the country having significant international standing.
HBL shares will be sold through a book-building process. The government abandoned its earlier plan to issue Global Depository Receipts on the London Stock Exchange as it could not timely meet the regulatory requirements.
The transaction structure for HBL was proposed by a consortium of financial advisers comprising Credit Suisse, Deutsche Bank, Arif Habib Limited and Elixir Securities.
The government will offer 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 the domestic stock exchanges, marketed and sold to international institutional buyers and HNWIs through a document in compliance to regulations of the US Securities Act.
The transaction structure also includes the potential placement of a significant component of the government’s shares to Multilateral Development Banks.
A total 609.3 million shares will be split into two categories. As many as 250 million shares or $500 million worth of shares will be sold as base shares through the book building process. The remaining 359.3 million shares will remain 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 of the WB.
Published in The Express Tribune, February 11th, 2015.
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