MCB OFFERS HIGHEST PRICE FOR UBL
From SHAMIM AHMED RIZVI,
June 17 - 23, 2002
The consortium of Muslim Commercial Bank and its associates offered the highest price of Rs. 8.5 billion to buy 51 per cent shares of the United Bank Ltd. Fifty one per cent of the total UBL 518 million shares of Rs. 10 each comes to slightly over 264 million and the offered price comes to Rs. 32.81 per share as against MCB shares sold at Rs. 58 each and Allied Bank at over Rs. 61 per share almost ten years back.
UBL privatization in the second tenure of Benazir Government at the rate of about Rs. 19 per share was cancelled amid charges of massive kickbacks and commissions. It may not be out of place to mention here that only recently the federal government injected about Rs 8 billion to improve its financial health and make UBL worthwhile for investors. Taking this amount into consideration, simple calculation leads to the conclusion that perhaps offer of Rs. 19 per share in 1996 was much better than Rs. 32.81 in 2002.
Three qualified bidders submitted their bids which were opened in Islamabad on Monday in the presence of the Minister for Privatization Mr. Altaf Saleem.
The other two bidders — Consortium of Abu Dhabi Group (UAE) & Bestway Holdings Limited (UK) through Bank Alfalah Limited, and the Consortium of Union Bank Limited & Associates — offered Rs. 4.8 billion and Rs. 4.5 billion, respectively. The highest offer will be forwarded to the State Bank of Pakistan for evaluation and recommendation, Privatization Minister Altaf Saleem said.
The Board of Privatization Commission, which will give its own recommendation to the Central Committee on Privatization for final approval, will consider the SBP recommendation. Final decision would take about a month, the minister said. The Financial Adviser Societe Generale & AMZ Securities are handling UBL transaction.
The Minister said he was satisfied with the transaction process but refused to comment whether the highest offer matched government's reference price. He said that at this stage he did not want to compromise commission's negotiation position. He said this transaction would pave the way for sell-off of HBL and NBP.
In reply to a question he said that if UBL went to MCB it would not create monopoly of a group as it would hold only 19 per cent share of the banking industry. He said the government wants to get out of the banking industry as it had 42 per cent share in the industry. He disclosed Pakistan State Oil was the other major transaction expected to be taken up in the last quarter of this year. Meanwhile, the government will keep selling shares in other companies such as ICP mutual funds and cement industry.
Earlier, Ahmad Waqar, Secretary, Privatization Commission said, that UBL was the first privatization opportunity in Pakistan's banking sector in five years i.e. after the sale of HCEBL. Earlier privatization efforts of UBL in 1996 did not succeed.
He said that UBL transaction incorporated the broad policy objectives of the Government which included that the government envisaged the private sector as the engine of economic growth and employment. The government was firmly committed to carrying out privatization in an open, fair and transparent manner, he added.
UBL is the fourth largest bank in Pakistan with a 9 per cent market with 1,101 branches across Pakistan as well as a valuable franchise of 16 international branches in the USA and Middle East, with a subsidiary in Switzerland, representative officers in Egypt and Iran and a 55 per cent stake and management control in a UK-based joint venture with seven branches and a 25 per cent stake in a joint venture in Oman.
In case the Commission considered the highest bid received unacceptable, the highest bidder would be asked to increase the bid price to an acceptable level. In case the highest bidder is not able to increase the bid price, the second highest bidder will be given the opportunity to increase the bid price and, failing that, the third highest bidder may be so requested, the statement said.
The MCB has no overseas branch and it has become more difficult after September 11 especially for any Pakistani bank to open a branch anywhere in the world. The MCB will emerge as the biggest domestic bank in Pakistan after acquiring major share-holdings of the UBL, said analysts.
Analysts expect that the UBL would not be run as a separate entity and would be merged into MCB. They also see downsizing in UBL and closure of many branches as MCB has branches where UBL branches exist they pointed out that if money comes from the MCB to buy UBL, it would create negative impact on MCB's business.