Efforts to maximize proceeds from sale of state-owned entities


Sep 30 - Oct 06, 2002

Under the present regime Privatization Commission has been able to conclude some transactions but some major transactions may be delayed due to general elections scheduled for October 10, 2002. Out of the several transactions, Privatization Commission has concluded, sale of Paksaudi Fertilizer, United Bank Limited (UBL) and Badin oil field of OGDC have substantial amounts. The other, relatively smaller transactions, were: sale of 10 per cent shares of National Bank of Pakistan, remaining 10 per cent shares of Bank Alfalah and Lot-A of ICP mutual funds and Thatta Cement.

Since the present government took over in October 1999, privatization process has progressed very well despite September 11 attacks and subsequent events in the region. Privatization Commission was able to raise Rs 35 billion since October 1999 compared to Rs 59.5 billion raised from November 1991 to October 1999. From 1996 to 1999 only Rs 2.35 billion were raised. Another important point is that most of the transactions concluded in the past led to filing of cases against the then governments, whereas all the transactions concluded by the present government has been conducted in a transparent manner and no case has been filed as yet.

The sale of 51 per cent shares alongwith transfer of management control of United Bank Limited deserves special mention. The highest bid of Rs 8.5 billion was received from Muslim Commercial Bank (MCB). Subsequently MCB raised its bid to Rs 12 billion. In the open bidding Abu Dhabi-Bestway, which initially submitted a bid of Rs 4.8 billion, raised its bid to Rs 12.35 billion. Out of this an amount of US$ 176 million will be received in foreign exchange and the balance in local currency.

The other major transactions fetching Rs 8.15 billion was sale of 100 per cent shares of Paksaudi Fertilizer to the consortium led by Fauji Fertilizer. Initially 90 per cent shares along with management control were sold to Fauji for an amount of Rs 7.3359 billion. Remaining 10 per cent shares were offered to those workers of the company who did not opt for the Golden Handshake Scheme. Since the employees did not exercise this option, Fauji was required to pick these shares as per the bid document. Fauji paid Rs 815.1 million for the 10 per cent shares.

ABAMCO has offered the highest bid of Rs 175 million for the Lot-A of ICP mutual funds, followed by PICIC ( Rs 162.5 million) and Arif Habib Investment Management (Rs 125.1 million). The top three bidders were asked by the Commission to raise their bids but all the three declared that they had given their final offer. Therefore, ABAMCO was declared the highest bidder. Privatization Commission has also invited EoIs for Lot-B (comprising of 13 funds) of ICP. The last date for the receipt of completed SoQs is September 28, 2002.

Privatization Commission received a bid of Rs 27.56 per share for the remaining 30 per cent shares (22.5 million shares) of Bank Alfalah from Abu Dhabi Group of UAE. The Group had already acquired 70 per cent shares of the Bank in 1997 through an open bidding.

The interested parties are required to submit their EoIs and the required earnest money for acquiring assets of Associated Cement located at Rohri. The plant is located 7 km from Sukkur with the facilities to produce different varieties of cement with an aggregate production capacity of 270,000 tonnes per annum. The company owns about 195.3 acres of purchased land, which include 13 acres area occupied by unauthorized persons. The factory is closed since 1999 and the payment of golden handshake to its employees has already been finalized without any burden on the buyer.

Iqbal Alimohammad and Consortium submitted the highest offer of Rs 696.431 million at the rate of Rs 9.70 per share for the sale of 71.79 million shares (90% shares) of Thatta Cement company. This includes Rs 383 million loan/liabilities and 50 per cent of GHS/VHS to be paid to the employees by the buyer. This makes the total above one billion rupee. The highest bidder was asked to improve their bid. The plant is based on dry process technology and has a daily production capacity of 1000 tonnes . The plant commenced operations in December 1982 and is fully operative. Its main products include ordinary portland cement, slag cement and sulphate resistant cement. The unit is located on 236 acres of land alongwith 4,725 acres of mining lease land.

Another 5 per cent shares of National Bank of Pakistan are being offered with green shoe option. These shares are being offered through stock exchanges at a price of Rs 21.00 per share. The previous IPO of 5 per cent shares the Bank received overwhelming response and the GoP decided to offload 10 per cent shares.

If one looks critically at the performance of Privatization Commission, it is exceptional Despite tough operating environment, it has been able to do more than what the earlier governments had done in their respective regimes. Still, they need to highlight status of all the forthcoming transactions for the benefit of investors.