SBP may not approve UBL acquisition by Nishat Group

Shareholder Bestway Group can intervene and buy shares instead of Mansha.


Express December 14, 2010

KARACHI: The State Bank of Pakistan (SBP) has not yet responded to the offer made by Nishat Group and MCB Bank Chairman Mian Mansha for the buyout of Abu Dhabi Group’s stake in UBL of 24.75 per cent.

This potential transaction could face significant regulatory scrutiny and may not be approved, according to KASB Securities.

The central bank may not encourage a banking company to own a separate stake in another bank without merging, in case Mansha intends to use MCB Bank’s balance sheet and a single group to have a stake in two major banks, commented KASB Securities analyst Hamza Ayub Marath.

There was considerable disagreement over the treatment of sponsor shares of MCB Bank at the time of the potential MCB RBS Pakistan deal. Mansha refused to surrender to SBP and a lawsuit from MCB Bank against SBP is still pending a court decision.

The Abu Dhabi Group is one of the major shareholders in UBL with a 30 per cent stake alongside the UK-based Bestway Group, which has a stake of 31 per cent. Interestingly, the Bestway Group also has the ‘first right of refusal’ to buy Abu Dhabi Group’s stake in UBL in the case of a rival offer, which is where things could shape up further.

Possible scenarios for UBL

If the reported offer for 25 per cent of UBL by Mian Mansha is successful, this could potentially be a catalyst for change at UBL, said Marath in a company research report. However, analysts are cognisant that as the smaller of the two major shareholders, implementing change may still be a challenge.

If the Bestway Group elects to exercise its ‘first right of refusal’ to buy from Abu Dhabi Group, this would result in the group becoming the largest shareholder in UBL with a 56 per cent stake. It is expected that this will eliminate the problem of differences in strategic direction that are rumoured to have surfaced in the past.

Regardless of whether the potential offer from Mansha or a takeout by the Bestway Group plays out, Marath believes that this development is likely to provide a ‘wake up call’ to UBL to redouble its efforts to improve its franchise position in the sector. According to the same news reports, there are also other groups looking to buy a stake in UBL.

Published in The Express Tribune, December 15th, 2010.

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