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ISLAMABAD: Ministry of Commerce is saying nothing on approval of structure for divestment of up to 20% shares of Pakistan Reinsurance Company Limited (PRCL) held by Government of Pakistan.

Well-informed sources told Business Recorder that Commerce Ministry wanted the Cabinet Committee on Privatisation (CCoP) to defer the decision until a one-and-one meeting is held between the Commerce Advisor and Finance Advisor, however, the former's request was not entertained.

Official documents seen by this newspaper reveal that Ministry of Privatization noted that pursuant to the Cabinet Committee on Privatization (CCoP) on 8 August 2019 and Privatization Commission (PC) Board on August 26, 2019, PC appointed Next Capital Limited (Consultant to the issue), Habib Bank Limited (Book Runner) and Haidermota & Co. (legal sub-contractor) as Financial Advisors for the divestment of up to 20 per cent shares of PRCL held by the Government of Pakistan.

PC Board in its meeting held on August 26, 2019 discussed that "PakRe is listed and PC intends to divest its shares for enhancing private sector participation in the issuance sector." It was also added that the strategic stake of the government (directly/indirectly) would not be affected, during the process.

The sources said, the Government of Pakistan currently holds approximately 73 per cent (directly or indirectly) shareholding through ;(i) Ministry of Commerce-44.88 per cent (direct shareholding) ;(ii) State Life Insurance Corporation (SLIC) - 24.41 per cent ;(iii) National Bank of Pakistan - 3.93 per cent; (iv) Whereas, PRCL employees' empowerment holds 6.12 per cent shares. The proposed divestment would effectively result in a reduction of overall GoP shareholding (direct and indirect) in PRCL to approximately 53 per cent with shareholding by Ministry of Commerce reduced to 24.88 per cent. Moreover, the proposed divestment may result in loss of a board seat given a sizeable shareholding would be offloaded into the market.

Ministry of Privatisation further noted that the draft transaction structure, as presented by the Financial Advisors, was deliberated by the PC Board in its meeting held on July 22, 2020, which recommended the following transaction structure for consideration of the CCoP ;(i) Secondary Public Offering at the Pakistan Stock Exchange to institutional, high net worth individuals and retail investors via publication of offer for sale document ;(ii) divestment size: 20% (60,000,000 ordinary shares) ;(iii) price determination: 100% Book Building Method ;(iv) after price discovery through book building method, 75 per cent shares will be allocated to institutional investors and high net worth individuals, while the remaining 25 per cent will be offered to retail investors and ;(v) retail investors will have the option to participate in the remaining 25 per cent portion, however, if any portion offered to retail investors remains undersubscribed, it will be taken up by institutional investors and high net worth individuals, who were declared as successful bidders in the book building.

During the ensuring discussion, it was pointed out that after completion of transaction the shareholding of the GoP (direct+ indirect) will reduce from 44.88 per cent to 24.88 per cent which might affect the ownership/control of the GoP.

It was also requested by Additional Secretary, Ministry of Commerce that the Advisor to the Prime Minister on Commerce and Investment has requested to defer the agenda item, and he would like to meet Minister for Privatisation on this issue.

The CCoP approved, in principle, the proposal with the direction to Privatization Division to hold a meeting with Commerce Division on the issue, if any and submit a report thereof to the CCoP for consideration in its next meeting.

CCoP also directed that SECP's recommendations in this regard may be followed without jeopardizing the sanctity of the process.

The official spokesperson for Commerce Ministry did not respond to the questions sent by the newspaper for two consecutive days.

However, a spokesperson for Privatisation Commission told this newspaper that neither Commerce Division Additional Secretary nor Commerce Advisor met with the PC authorities for further discussion on this transaction.

"The minutes of CCoP have been ratified by the federal cabinet. Commerce Advisor was also present in the meeting. He did not offer any comments at the time of cabinet approval," the spokesperson added.

Copyright Business Recorder, 2020