Pakistan Steel fetches $362m: Consortium offers $111m for plant, machinery
By Khaleeq Kiani
ISLAMABAD, March 31: A consortium of local and foreign firms on Friday won the $362 million (Rs21.68 billion) bid to acquire 75 per cent stake and management control of Pakistan Steel, the country’s largest industrial unit, at the rate of Rs16.8 per share.
The Privatization Commission issued a letter of acceptance soon after the bidding to the consortium, comprising M. Magnitogorsk Iron and Steel Works Open JSC of Russia, Twwairqi Steel Mills of Saudi Arabia and Arif Habib Securities, to deposit 25 per cent of its bid in 20 days and complete full payment in 60 days.
Privatization Minister Awais Ahmad Khan Leghari said the total price of 100 per cent shares of PSMC translates into $482 million on the basis of successful bid rate.
He said out of 19,000 acre real estate of PSMC, around 14,500 acres worth of $800 million has been separated from the transaction, which would be used by the government for some other industrial purposes.
As such, the real estate value of remaining 4,547 acres of land, which is part of the sale transaction, alone comes to about $251 million. This leaves behind only $111 million value offered by the consortium for the plant and machinery of the country’s largest and only integrated manufacturing plant that produces 1.1 million tons of steel per year.
Al-Tuwairqi Steel has already set up a steel plant in the same premises and was inaugurated by President General Pervez Musharraf on Thursday. This will provide an added advantage to the successful bidder.
Mr Leghari, who presided over first bidding of any transaction after taking over the additional charge of privatization minister a day earlier, said the government of Pakistan had already authorized him to issue LOA since the highest bid was in the price range approved by the cabinet committee on privatization.
He did not disclose the reference price and said the package for the workers would be part of the government’s 25 per cent remaining stake in the PSMC.
The second bidder comprising Noor Financial of Kuwait, Industrial Union of Donbass, Ukraine and the Government of Ras Al-Khaima and Al-Jomaih Holdings of Saudi Arabia declined to compete further after offering its last offer of $355 million (Rs21.6 billion) at the rate of Rs16.50 per share.
The bidding for the sale of over 1.29 billion (75 per cent) shares was held in a two-phased manner, following the two became eligible for bidding by depositing $30 million each as earnest money. Al-Noor Group that lost in the end, submitted a sealed bid of $151.33 million (Rs15.059 billion) at the rate of Rs11.67 per share in the first round.
In the first round, the successful bidder submitted a sealed bid of $219 million (Rs13.12 billion) at the rate of Rs10.17 per share and was way behind the seal bid of Al-Noor Group. Both the bidders were asked to improve their bids by at least 25 paisa per share each through an outcry which finally settled for $362 million in the end.
Mr Leghari said an agreement has been reached with the employees and they were being offered a package, which he said was never given to the employees of any other entity.
Earlier, nine firms had been pre-qualified, out of which eight conducted active due diligence. Five of the pre-qualified parties attended the pre-bid meeting. The pre-qualified parties completed their due diligence of the transaction, including plant visits and physical and virtual data room. Six pre-qualified parties joined to form two bidding consortia.
PSMC is the country’s largest and the only integrated steel manufacturing plant, with an annual designed production capacity of 1.1 million tonnes. It was incorporated as a private limited company in 1968 and commenced full-scale commercial operations in 1984.
PSMC complex includes coke oven batteries, a sintering plant, blast furnaces, steel converters, bloom and slab casters, billet mill, hot and cold rolling mills, galvanising unit and 165MW of own power generation units, supported by various other ancillary units.
It is located 40-km southeast of Karachi close to Port Bin Qasim, with access to a dedicated jetty, which facilitates import of raw materials. The PSMC manufactures a wide mix of products, including flat and long products.
PSMC enjoys a captive domestic market because of the prevalent demand-supply imbalance in the country’s steel sector.
