Islamabad:
The Privatization Commission’s Board of Directors on Tuesday declared four local parties, including three in connection with cement business entitled to offer the acquisition of Pakistan International Airlines (PIA), which came one step closer to the sale of loss -making unit.
In a related development, the Cabinet Committee for Privatization (CCOP) approved the transaction structure for the disposal of Roosevelt Hotel, New York, which is owned by Pia. The committee chose the opportunity to run the hotel as a joint venture, which had been proposed by the financial adviser a year ago, but was ignored by the government. Deputy Prime Minister Ishaq Dar was chairman of the CCOP meeting.
The Privatization Commission’s Board of Directors met under the presidency of the adviser to the Prime Minister on Privatization Muhammad Ali. It approved the pre-qualification of four interested parties for the disposal of Pakistan International Airlines Corporation Limited (PIACL), according to a press release.
The Board of Directors reviewed recommendations from the pre-qualification committee based on evaluation of statements on qualification (SOQS) submitted by five potential investors, in line with technical, financial and documentary requirements, defined in the request for qualification statement (RSOQ). The Board of Directors declared a consortium consisting of Lucky Cement, Hub Power Holdings, Kohat Cement and Metro Ventures that fit Pia.
The second consortium included ARIF Habib Corporation, Fatima Fertilizer Company, City Schools (Private) Limited and Lake City Holdings (Private) Limited. The Board of Directors also declared the Fauji fertilizer company, which was suitable to bid on Pia, and accepted the unit as a private limited company. It is owned by the Fauji Foundation. Airblue (Private) Limited was the only device that had been declared suitable for bids and ran an aviation business.
The Privatization Commission said that the pre-qualified parties would now move on to the due diligence phase of the page-critical step in the transparent and competitive privatization process. A consortium of Augment Securities & Investments, Serene Air, Bahria Foundation, Mega C&S Holding and Equitas Capital LLC could not qualify for bids.
The government wants to sell majority shares in Pia together with management control. During the last attempt, the government had set the minimum price of RS85.03 billion with a negative balance of RS45 billion. Now the government has taken more debt from the balance, which should have a positive impact on the minimum price.
Pia’s bid is expected to take place in the last quarter (October-December) of the current calendar year, said Muhammad Ali, adviser to the Prime Minister on privatization.
The Privatization Commission had invited an expression of interest (EOIS) for the disposal of 51-100% share capital in PIACL together with management control. It is the second attempt to privatize the airline after the first bid failed last year. The Commission said CCOP on Tuesday approved the transaction structure for the Roosevelt Hotel, New York, as proposed by the Privatization Commission’s board of directors.
Out of the three options evaluated by the financial adviser-direct sales, Joint Venture is with several options and long-term lease-joint venture model with several options approved by CCOP, according to the announcement. This opportunity aims to maximize the long-term value for the country while ensuring flexibility, multiple exit options and minimizing future fiscal exposure, added.
These decisions reflect the government’s strong commitment to promoting its financial reform and privatization agenda in a transparent, market -driven and investor -friendly way, the Commission said.
Pakistan hired Jones Lang Lasalle Americas as the financial adviser with a fee of RS2.2 billion. According to its report on the transaction structure, Pakistan does not have to pay additional money for a joint venture as its contribution comes in the form of the hotel’s land value. “Based on pre-marketing, due diligence and analysis of the options, Nets Joint Venture structure, the highest value for Pakistan’s government,” the counselor said in his report.
In the Joint Venture scenario, the government will contribute the whole land value to a joint venture partner. The land value is calculated on the basis of its full potential, including the 32 -storey building. A contribution agreement will be signed immediately with the Joint Venture Agreement to be followed in 2027.
The development partner makes two initial deposits. “This option has the highest risk with the highest net proceeds to Pakistan,” noted the advisor in the report presented last year.
