KARACHI, Aug 10: State-run Habib Bank is a “jewel” that has been offered for sale as Dr Ishrat Husain, Governor of State Bank, puts it and sources say it has attracted domestic strategic investors as well as multilateral agencies, interested in acquiring stakes in the bank.
A consortium of leading local businessmen — the Aga Khan Foundation, Habib Bank A.G. Zurich and Bestway Holdings Group of Abu Dhabi — are among those who have submitted EoIs (Expressions of Interest) to the Privatization Commission. The last date for submitting EoIs was July 31 and the process of pre-qualification of prospective bidders is expected to be completed by August 15.
And outside the formal sale process, World Bank’s affiliate International Finance Corporation, Asian Development Bank and Commonwealth Development Corporation are looking at the bank and the proposed deal with an aim at acquiring stakes jointly with the winner in the bid. the representatives of these institutions have been sounding some of the prospective bidders.
Road shows have also been held for 2-3 possible buyers in the Middle East and the UK, which were conducted by HBL president Zakir Mahmood and an official of the Privatization Commission.
Whereas Pakistan is currently not a destination for large investments from the West required for purchase of HBL, the domestic investors have been activated by the restructuring and privatization of the financial sector. Some of the locals have joined hands with Arab investors.
The entry of Mian Mohammad Mansha, a top textile industrialist into banking, his acquisition of MCB and bid for UBL has perhaps inspired a group of Karachi businessmen that includes leading textile barons Bashir Ali Mohammad and Tabba to bid for Habib Bank. They are progressive businessmen, who have been modernizing their plants depending more on their own equity rather than bank borrowing to face global competition. And they have a track record to impress the Privatization Commission. Whether they would be able to raise the kind of money that is needed to buy at least 26 per cent of the stakes, is the moot question. Their interest in HBL also indicates that textile owners are exploring fresh avenues for investment, not for new projects but acquisition of running enterprises.
Currently, the State Bank is looking at the sources of funds, which MCB would use to buy the UBL. If Mian Mansha gets UBL, he would benefit from synergies created by the merger of UBL and MCB, and the merged unit would also have global reach, which his bank currently does not have. Pakistan needs large banks to have a presence in the global market and compete with leading foreign banks. The merger would lead to cutting of overhead costs, saving on closure of competing branches and the merged unit would benefit from UBL’s foreign subsidiaries, branches and joint ventures. Barring a major upset, Mian Mansha would emerge the winner.
Among those who have submitted EoIs for HBL to the Privatization Commission is Geneva-based Habib Bank A.G. Zurich, which was launched by the owners of the Habib Bank when HBL was nationalized by Bhutto’s government. As former owners, they would expect that the HBL should be returned to them as it was being privatized. The right of first refusal was not given to Adamjees in case of MCB sell-off. It is unlikely that the government would concede on this point. Although some experts believe that the former owners should have the first right of refusal if they can match the highest bid.
But not all the bidders would be able to mobilize resources for acquiring the kind of money that is required to buy 26-51 per cent stakes in the HBL. The government may prefer a buyer acquiring 51 stakes to the offer made for a mere 26 per cent stakes. Herein comes the advantage of the Aga Khan’s resources and his creditability with the international agencies like IFC and CDC. Normally, IFC takes a maximum of 25 per cent stakes in any venture.
How the Bestway group of Abu Dhabi would fare is difficult to forecast as was the unpredictable course they took in case of bid for UBL. But they do indicate that investors from the Middle East are continuing showing interest in acquiring stakes in the financial sector. The latest example is the interest of Pak-Kuwait to buy IDBP, which has a licence for commercial banking. Sources say that the State Bank would like the IDBP to be run as a SME bank. Initially, as market reports go, Pak-Kuwait may acquire the bank on a two-year management contract.