Consolidating position: Bestway acquires more shares in UBL

Right of refusal exercised by matching Nishat Group bid.

KARACHI: Bestway (Holding) Limited is all set to increase its stake in United Bank Limited (UBL) after the company inked a share-purchase agreement with the Abu Dhabi Group (ADG) on December 28, UBL announced in a notice sent to the Karachi Stock Exchange on Wednesday.

The deal is subject to approval from the State Bank of Pakistan (SBP). ADG owns about 25.5 per cent of the issued and outstanding ordinary shares of UBL as well as 4.8 per cent of the global depository receipts issued by the bank. Prior to the agreement, Bestway held about 31 per cent of UBL’s outstanding ordinary shares. Bestway also had managing control of the bank, and the purchase of additional shares will only serve to increase its shareholding of the listed bank.

Mian Muhammad Mansha’s Nishat Group had been eyeing UBL. The bank has a strong presence in the Middle East and also operates in Europe directly as well as through its subsidiary, a market that MCB has so far not entered. The first Mansha bid for the bank was about $203 million for a 51 per cent stake back in 2001 when the bank was being privatised. UBL was finally sold to ADG and Bestway by the government for about $211 million.

Nishat Group already enjoys managing control in UBL’s most direct competitor, MCB Bank. However, a source revealed that Bestway had exercised its right of refusal to acquire additional stake at the rates offered by Nishat Group.

ADG also has stakes in Wateen, Warid and Bank Alfalah. “Wateen is facing cash constraints and the group is in the process of injecting about Rs2 billion into this business,” asserted BMA Capital Vice President Hamad Aslam. He said that the sale of UBL stake will help the group shore up liquidity for its other business concerns.

“The acquisition will likely not have any significant impact on the management of UBL,” asserted Aslam. However, the deal could hold repercussions for the market price of UBL’s stock. “The price at which this deal has been executed is still not known, and when that information becomes public the market will definitely take a cue from that number,” said the analyst.

UBL has been highlighted by analysts as much better placed among bigger banks for successfully insulating its portfolio against major erosion from non-performing loans. The bank’s stock closed at Rs68.19 per share after surging more than Rs3 in the day’s trade. The bank’s market capitalisation towers over $900 million at present.

“Given the fact that the deal is for 20 per cent of the stake, it must roughly stand around $180 to $200 million,” one analyst estimated. Analysts say that if the deal between ADG and Bestway was executed at a higher rate, then UBL’s stock price may be in for a few more ticks upwards.

Published in The Express Tribune, December 30^th, 2010.