ISLAMABAD, 19 August — The Gulf and Middle East interest in buying Pakistan’s two biggest banks has sharpened this race that has entered in a crucial stage.
At stake are United Bank Ltd. (UBL) and Habib Bank Ltd. (HBL), the two biggest state-owned banks, currently on sale. They are part of the five bank group that was nationalized in 1974. The government has already disinvested all or bulk of its shareholding in Muslim Commercial Bank (MCB) and the Allied Bank of Pakistan (ABL).
Besides these four, government’s plans are afoot to sell to the public five percent shares in National Bank of Pakistan (NBP) — the fifth, and the last, state-owned bank. The government has spent nearly $400 million, and additional amount in direct subsidy, in restructuring these and other financial sector banks and institutions to make them attractive for private buyers before these were offered for sale. The Expression of Interest (EoIs) for purchase and management control of HBL has been submitted by various groups to the government’s Privatization Commission (PC). Those interested include the Abu Dhabi consortium and its associate Bestway Holdings Group of Abu Dhabi and Alfalah Bank, Paris-based Aga Khan Foundation of Prince Karim Agha Khan, and the Zurich-based Habib Bank A.G.
"The process of prequalification of the prospective bidders is expected to be completed within the next few days," a PC spokesman said.
Banking industry sources say that Washington D.C.-based International Finance Corporation (IFC) that an affiliate of the World Bank providing credit to private sector, as well as Asian Development Bank and the Commonwealth Development Cooperation (CDC), are evaluating the HBL sale to buy stakes in the bank with the group that finally wins the bid.
HBL President Zakir Mahmood and an official of PC has, recently, held roadshows in United Kingdom and the Middle East for some prospective buyers of the bank.
Some of the Karachi-based textile industrialists and exporters are reported by the banking industry to be among the prospective bidders for HBL, as one of the textile industrialists Mohammad Mansha already owns the MCB and has bid for UBL in order to become owner of the country’s biggest banking empire. They own big industries and big business, largely with their own cash. These industrialists plan to raise the equity to buy HBL on their own, according to business and industry sources. At stake is purchase of 26 to 51 percent shares of HBL. Depending on their financial sources, the prospective buyers will have a choice to bid for upto 51 percent of shares. But, the PC sources in Islamabad say, the commission will prefer sale of 51 percent outright. The Aga Khan Foundation is a black force that should be watched. This is because Prince Karim Aga Khan and his group can mobilize a considerable amount of cash to buy HBL equity with likely IFC and CDC funding.
There, however, is an open question as to how Abu Dhabi-based Alfalah and UK-based Bestway Holdings Group will fair in the HBL deal as it has already staked a claim to buy UBL for Rs.12.3 billion. The bid was made days after the MCB and Mansha Group had upped its original offering of Rs.8.5 billion to Rs.12 billion. At that level the MCB offer is slightly higher than the reference price — the minimum sale price — set by PC. The original reference price was Rs.8.3 billion. The Alfalah- Bestway Holdings Group are strongly pressing its claim to buy UBL. Sir Anwar Pervez, a UK-based financier of Pakistani origin who heads Bestway Holdings, representing the Abu Dhabi Group, in a meeting with Finance Minister Shaukat Aziz has reiterated that its offer of Rs.12.3 billion for UBL should be accepted, as it is Rs.0.3 billion higher than MCB’s offer. Its original offer was Rs.4.8 billion. The amount means that the group has raised it almost to 270 percent.
A fourth contender for UBL is Tessori Group, based in the Gulf and Pakistan. It is the biggest importer of gold and bullion into Pakistan. Its offer was Rs.13 billion. But PC called it "a non-serious offer" as it was made after almost the entire bidding process had been completed.
