Privatisation Commission: IFC’s involvement in HBL share acquisition unclear

Its board has not yet approved the bidding case, says govt official.


Shahbaz Rana March 27, 2015
Its board has not yet approved the bidding case, says govt official. CREATIVE COMMONS

ISLAMABAD:


The participation of International Finance Corporation (IFC) – part of the World Bank (WB) Group – in acquisition of Habib Bank Limited (HBL)’s shares remains elusive — as the government is set to undertake road shows to sell its remaining 41.5% stake in the country’s largest commercial bank.


The Privatisation Commission (PC) will hold road shows from Monday in the United States, Singapore and United Arab Emirates to lure investors ahead of the book-building process. The government is going to undertake the single largest capital market transaction in the country’s history amid high hopes of getting a good response.

The Cabinet Committee on Privatisation (CCOP) has already approved a transaction structure under which it will sell 609.3 million shares of the HBL. The transaction structure 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 through an integrated international book-building exercise.

The full subscription of the shares will depend upon the participation of foreign and institutional investors, said an official of the commission. It is expecting that at least two foreign anchor investors will participate in the bidding.



The government has split its remaining 609.3 million shares into two categories. As many as 250 million shares will be sold as base shares through the book-building process. The process is expected to be run on April 8 and 9.

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 of the WB.

A meeting of PC and CCOP has been convened for April 6 to approve the reference price for offloading the shares. However, it has not yet been clear that the IFC will be able to participate in the bidding, said a government official. The IFC has in principle decided to participate in the bidding but its board has not yet approved the case.

In fact, a case for the board approval has not yet been initiated and it takes at least two weeks for calling a board meeting after initiation of a case, said another official, making the possibility of bidding by IFC on April 8 or April 9 unclear.

The foreign investors’ participation is very critical, as the local market does not have the appetite to absorb such a huge transaction involving over Rs100 billion funds.

Target achievement

Although, the reference price will be approved on April 6, the government is anticipating receiving $1 billion to $1.1 billion. The HBL sale proceeds will help the government come closer to this fiscal year’s privatisation proceeds target of Rs198 billion, roughly $2 billion.

“The Rs198-billion target will be missed by the extent to which the Oil and Gas Development Corporation deal did not materialise,” said PC Chairman Mohammad Zubair, while addressing a press conference on Friday. The government had to cancel the OGDCL deal after it could not get encouraging response from the investors.

While commenting on its first strategic sale of Heavy Electrical Complex, Zubair said selling the entity was the best option as it had exhausted all the credit lines and there was no business model to run the state-owned enterprise.

He said the government had the choice to either pump in money or let the private sector take over and run it efficiently. He said the buyer of HEC, Cargill Holdings Limited, has shared a plan to make Rs350 million investment. Zubair said the buyer will be bound not to change the nature of business, which is manufacturing transformers.

Privatisation Secretary Ahmad Nawaz Sukhera said that generally the buyer cannot change the nature of the business for five years. The government has approved to sell the HEC at a price of Rs250 million. In addition, the buyer will pick all the existing and contingent liabilities of the entity.

Published in The Express Tribune, March 28th, 2015.

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