Nishat Groups bidding for Abu Dhabi Groups share in UBL sends a strong signal to the investor class that Pakistans richest man has confidence on the countrys economic future. Like any smart businessman would do, Mian Muhammad Mansha is purchasing assets when the business cycle is at its ebb, perhaps to make windfall gains when the economy booms.
His group along with other business groups bought 51 percent shares in MCB at $206 million from the government in 1991 and seventeen years down the road he sold 20 percent shares to a Malaysian bank for $898 million. Mansha struck a magnificent deal at a premium to the banks all-time-high stock value at the KSE by selling MCBs shares at a whopping margin of 22 times his purchasing price.
But the brilliant track record saw some shades of grey during UBLs privatisation in 2001. His valuation for UBL was initially at Rs 11.5 billion, MCB bid Rs 12 billion for 51 percent stake. However, the banks management was sold, after a Dutch auction to a joint offer of the Abu Dhabi Group (ADG) and Bestway group (UK) at $211 million. It is pertinent to note that the Mansha group refused to participate in the auction since it amounted to changing the rule mid-way into the process.
Almost a decade later, this shrewd man is back in the quest of buying a strategic share of 24.75 percent in UBL. What MCB lacks and that which urges the Nishat Group to push for UBL again and again is the latters foreign franchises.
Thanks to UBL founder late Aga Hassan Abidi, UBL has a strong presence in the Middle East, including UAE and Oman, while in Europe, the banks existence in UK, USA and its subsidiary in Switzerland give UBL a clear advantage over MCB.
Despite Manshas repeated efforts, high entry barriers for a Pakistani entity, in the aftermath of 9/11, prevented MCB from finding ground in the UAE or the West. Moreover, tapping the market in the west is next to impossible, given that HBL, despite the strong reputation of the Aga Khan Fund for Economic Development, could not open a branch in Canada because of Pakistans non-signatory status in the anti-money-laundering convention.
UBLs market cap as of today is $915 million; the Nishat groups bid for a block could be at a 15-20 per cent premium to market price, which means that the bid would hover around $260-270 million.
ADG seems serious about selling its stake in UBL as it has appointed Morgan Stanley as its advisor, which also implies that other buyers may also be approaching them. Hence, its premature to say that Mansha and party would be able to get hold of UBL even this time.
The success of the Nishat Group to buy a stake in UBL is contingent upon a number of factors. ADG cannot sell its shares without the consent of Bestway which has the first right of refusal on the deal; market reports suggest that Bestway may get financing from HBL to buy ADGs shares in UBL, or HBL will buy them itself at some premium to the price offered by Mansha.
Secondly, the ongoing litigation between the Nishat Group and the SBP, owing to the rejection of MCBs bid to buy RBS on regulatory grounds, may prove to be an impediment. Nonetheless, now that the heads at the finance ministry and the central bank have changed, Mansha can perhaps better negotiate with the regulator on the premise that a local group is buying back assets from a foreigner, which will stop dividend repatriation from Pakistan.
Hence, there is a fair chance of an out of court settlement with the SBP. However, given the odds against the deal, it is best to wait and watch.
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