A meeting of Privatisation Board (PC) followed by a meeting of Cabinet Committee on Privatisation (CCoP) will be held today (Saturday) to approve the strike price and volume of shares to be offered to foreign and local buyers on the basis of response received during the book building process.
Sources said the government wanted to complete the transaction of 609 million, 42 per cent, of its shares in HBL in one transaction to mobilise around $1.3 billion but the PC board's suggestion was to split the transaction into two phases as failure to complete the transaction in one go would have negative impact on the entire process.
The remaining 359.3 million shares may be made available under the greenshoe option (shares to be exercised on the basis of demand). The Finance Minister committed to the International Monetary Fund (IMF) - during the sixth review of $6.64 billion Extended Fund Facility (EFF) - that the government would carry out the divestment of the remaining government holding in HBL in two phases.
The PC board had initially approved HBL's share price at Rs 178 to mobilise around Rs 109 billion; and another PC Board meeting held hours before the CCoP's had proposed a minimum per share price of Rs 170 to the Cabinet Committee on Privatisation (CCoP) chaired by Finance Minister Ishaq Dar. The CCoP approved floor price of Rs 166 per share which was Rs 4 per share lower than the floor price suggested by PC board.
The CCoP meeting approved divestment of up to 250 million government shares in HBL out of a total holding of 609 million shares in the first phase and the remaining would be offered in the second phase.
According to the approved Offer for Sale Document (OFSD), the offer of HBL shares is being made only through the book building method to the eligible international and domestic institutional investors and high-net worth individual investors (HNWI). The book building began on Tuesday April 07, 2015 and concluded on Friday.
Sources said that maximum five percent shares would be allowed to an individual or a party and if anybody intends to purchase more than 5 percent shares he/she has to get permission from State Bank of Pakistan as well as major stakeholder in the bank.
The PC Board and CCoP will meet on Saturday (today) to approve the strike price based on the final results of the book building process.
The Government of Pakistan's secondary public offering (SPO) of its residual shares in the country's largest commercial bank, Habib Bank Limited (HBL), has got an overwhelming response from the international and local equity investors.
"This would be the biggest capital market transaction in Pakistan and second biggest privatisation deal after PTCL," market analysts said.
The response to HBL secondary offer, the analysts said, was far better than expectations.
"This deal would also help also help Govt. attract Foreign Direct Investment," said analysts.
The positive development also had a strong bearing on the Karachi stocks market which Friday surged by 337 points to 32,351 points.
Samar Iqbal of Topline Research said the market rallied by one percent on news of record bidding of over $1 billion in HBL's SPO. "HBL deal garnered investor interest in other banks as well," she added. Arhum Ghaus of JS Global said HBL spiked up 1.5 after the "overwhelming foreign response" in the SPO.
The positive also made other banks like ABL, UBL and MCB gain 3, 2 and 3.5 percent, respectively, at the day's close.
HBL was privatised in 2004 and was sold to Agha Khan Fund for Economic Development at Rs 22 billion for 51 percent stake and market capitalisation of Rs 44 billion.
Once materialised the receipt of over a billion dollars on account of HBL sell-off would reflect positively on the country's Balance of Payment position.
Also, the current overwhelming response of foreign and local equity investors for Pakistani saleable equities would brighten prospect for other state-owned enterprises that would be up for sale in the days to come.