NIB Bank buys PICIC in $300m deal

In what is being seen as a major move in the banking sector, the NIB Bank Limited informed the KSE that it had reached an agreement in principle with certain shareholders of PICIC DFI for the acquisition of their respective shareholding in this entity.

In a deal that analysts put at $300 million, it is proposed that NIB Bank will merge with PICIC DFI and its subsidiary, the PICIC Commercial Bank Ltd, making it the largest non privatised private sector bank in Pakistan – with a balance sheet of about Rs150 billion.

When contacted, President and CEO of NIB Bank, Iqbal Hassan, told The News that the next stage would be getting all the necessary clearances and approvals as well as having the due diligence done. The process of applying to the State Bank has also been initiated but Hassan was reluctant to put a time frame to the deal.

Other bankers, however, said that this process should be done in a couple of weeks. Without naming the four major shareholders of PICIC, the notice given on Wednesday to the KSE said NIB Bank Limited has informed the State Bank of Pakistan about this acquisition of PICIC shares for conducting due diligence of PICIC and certain of its related entities (subsidiaries) by following the central bank policy announced in March, 2005.

PICIC’s letter to the KSE said that a group of shareholders informed PICIC of their intent to sell their shareholding, including the beneficial ownership in PICIC.

The letter said that the purchaser would be applying to the central bank for permission to conduct a due diligence to evaluate the financial position of PICIC. PICIC made its position clear by saying “please note that PICIC has not been involved in any discussion with the potential purchaser.”

Sources of banking industry told The News on Wednesday that the four major shareholders of PICIC on Tuesday jointly submitted a letter to managing director of PICIC in which they informed their joint decision of selling their shareholdings at Rs82 per share of Rs10.

On receipt of this letter, sources said the managing Director of PICIC, Mohammad Ali Khoja, after consultations with legal advisers of the DFI, passed on this information to State Bank of Pakistan and three stock exchanges of the country on Wednesday.

The four major shareholders are state-controlled National Investment Trust, Saleem Altaf, chairman board of directors, PICIC, Basheer Jan Mohammad, presently serving as vice chairman of board of directors and Zahid Basheer, Director of PICIC.

Sources said the offer of sale of shares will include parent company PICIC DFI which owns the PICIC Commercial Bank (60%), its Asset Management Company (100%), and 30 percent remaining shares of PICIC insurance Company.

These four major share holders control almost 52 percent shares.

Sources said if the central bank allows this deal to go through, a chartered accountancy company will be appointed to settle any outstanding issues. PICIC will open a special counter to facilitate both new investors and a team of consultants. The Singaporean parent company also holds the some percentage of global shares of Standard Chartered Bank, ICICI Bank of India, 40-50 percent shares of Singaporean Airline and a German based bank. Sources said if the central bank approves this acquisition of PICIC shares the on-going merger plan of PICIC and PICIC Commercial bank will automatically shelved.

The new banking entity will be among the 10 largest commercial bank of the country. After acquisition of shares, foreign investors will apply afresh for obtaining commercial banking license from the central bank.

Meanwhile NIB Bank has informed the Karachi Stock Exchange that to consider “ urgent matters” a meeting of board of directors has been summoned on 12th December at Karachi.

The news of acquisition of PICIC shares, by foreign investors spread like fire on Wednesday and 14,753,000 shares were traded on the KSE. The share price of the scrip went as high Rs77.25 per share but closed at Rs75.8 per share. The opening rate was Rs75.25 per share on Wednesday.

Source: The News