ISLAMABAD, June 4: The government has decided in principle to offer 10 per cent shares of Habib Bank Limited (HBL) to its employees following refusal by the international financial institutions to prepare the bank for privatization.
Official sources told Dawn that another chunk of 5 to 10 per cent shares would be offered to the general public in next couple of months through green shoe option. In this way, a total of up to 20 per cent HBL shares would be transferred to the employees and the general public.
These sources said that indications were that the privatization of the strategic transfer of shares would be delayed for quite some time, i.e up to December 2003.
However, the bank has been directed to hire a local legal firm to deal with legal issues and a chartered accountant to settle down financial issues. Under the original plan agreed with the donors, the HBL has to be privatized latest by March 2003.
These sources said that President General Pervez Musharraf was informed recently that hiring of financial adviser with the help of the World Bank for the strategic sale of HBL could not materialise. He was also informed that cost saving measures like reduction in staff strength was also affecting the quality of the bank’s work.
These sources said that the none of the six investment banks returned request for proposals (RFPs) to act as financial advisers of the HBL transaction. There was also no likelihood that any top quality investment bank would come in the future even if it was advertized at the moment.
A meeting of the Cabinet Committee on Privatization (CCoP), presided over by Finance Minister Shaukat Aziz recently, decided that the question of allocating 10 per cent shares to the employees of HBL should be examined. He referred to the sale of industrial units where 10 per cent share were given to the employees on case to case basis.
The CCoP decided that the privatization process of HBL be undertaken by using in-house resources and strengthen them with local private sector assistance. An amount of Rs15 million was approved for in-house processing of HBL transaction and preparation.
For this purpose, the Privatization Commission was directed to hire a reputable legal firm, a quality chartered accountancy firm and an experienced banking adviser. It was further decided that offshore support be obtained from the international network of HBL itself as well as from Pakistani missions abroad.
It was agreed, said the sources, that even if the advertisement was released, it will take at least six months for hiring of financial adviser. At least another six month would be required by the financial adviser to prepare the transaction and then the marketing and sale process would take another six months. The meeting, said the sources, agreed that even if the process was started today, it would not be possible to close the transaction before December 2003.
The CCOP, however, directed that valuation report and bidding documents for United Bank Limited (UBL) were now ready and could be utilized for preparation of Habib Bank transaction through in-house exercise.
On this, the State Bank of Pakistan has meanwhile warned the government that valuation of a bank was a highly technical and professional work and if not properly done could affect an otherwise perfect transaction.
The central bank said that if the Privatization Commission was comfortable with carrying out proper valuation, only then the in- house processing be carried forward, otherwise it could even destabilize the whole banking sector.
When contacted a Privatization Commission spokesman said that work on the initial public offering (IPO) of 5-10 per cent shares was in progress in consultation with the Securities and Exchange Commission of Pakistan (SECP).
He confirmed that IPO would be on the basis of green shoe option that entailed that the government could increase or decrease percentage of share offers to the public keeping in mind the market response. He declined to comment on the delay.
