Bank Muscat, Nomura Investment (Japan) and International Finance Corporation (An affiliate of the World Bank) have acquired 68 percent of Saudi Pak Bank Limited shares for $160.23 million (Rs 9.97 billion).
The Share purchase agreement was initialled over the weekend (January 5th) by a consortium which was led by Pakistani banker Shaukat Tarin and also comprised Sadiq Saeed (a London-based Pakistani investment banker with Nomura Investment) and Rasheed Zahir, Managing Director Saudi Pak Investment Company.
Under the agreement, the buyers will pay Rs 29.30 per share for 340,154,091 shares and tender to other minority shareholders at the same price. J.K Traders (of Faisalabad), holding 22 percent stake in Saudi Pak Bank, have also reportedly agreed to sell to the consortium for $51.84 million.
This would raise the stakes of Tarin-led consortium to 90 percent in the 55-branch network bank (originally known as Prudential Bank) having deposits of worth Rs 42 billion and advances amounting to Rs 32 billion. According to sources, Bank Muscat is acquiring 35 percent while IFC has taken 20 percent and Nomura around 13 percent in the bank.
Various regulatory approvals and tendering process are expected to be completed by February 10 and management transferred to the buyers by middle of next month.
Over three years ago, the State Bank of Pakistan intervened and forced the sale of troubled the Prudential Bank to Saudi Pak Investment Company and J.K. Traders.
The bank subsequently acquired two prestigious properties - one in Karachi and the other in Lahore from Union Bank Limited - for Rs 300 million. Union (now Standard Chartered) had acquired these with the acquisition of three branches of Emirates Bank of UAE.
During the last three years, Saudi Pak has made an operational profit of Rs 2 billion. However, the bank had to provide Rs 2.2 billion in provisions to cover the inherited non-performing loans.
In the first nine months of 2006, Saudi Pak operational profit was Rs 595 million. After provisioning of Rs 585 million a net loss of Rs 10 million was declared.
Saudi Pak management, in its last public report, stated that subsequent to the induction of new management in 2005, for steering the bank towards new horizons with quality growth, the most uphill task of bringing in quality human resource was achieved in all areas, with a renewed focus on strengthening the banks platform with respect to all facets of banking. Special emphasis was given to the restructuring of business functions, risk, technology and operations.
The bank has been able to create a value-added enterprise image in the market. The Saudi Pak is now recognised as a brand offering quality products and services. "Sahulat Umra" - its'' Umra product has been a successful hit in the market. Other players are now trying to emulate the product.
On the Corporate/Investment banking services front, the bank has created an image of an active player in the market and has emerged as a key partner for the good corporate franchise that has been built up specifically in the last two years. Recently, the bank closed the largest hotel financing consortium todate in Pakistan, as the joint lead arranger for Avari Towers Islamabad Project. It also acted as the lead arranger for a state of art, real estate project, of L/G group, financial close for which was achieved in last quarter 2006.
Total branches during the last two years have almost doubled and are currently 50, which by the year end will increase to 55. Each branch is a state of art banking facility that offers excellent banking services. Rigorous pursuit of technological augmentation in terms of offering value added services to customers has resulted in creation of "Saudi Pak Transact Internet and Mobile Banking," a service through which customers can have the luxury of using banking facility at their leisurely convenience.
During the last three years (2005 to September 2007) the bank has earned substantial profits (over Rs 2 billion) from its operations. However, with a view to clean up the loan portfolio and strengthen the balance sheet, approx. Rs 2.2 billion was utilised for making provisions against bad debts. This positively substantiates the relentless pursuit of the bank''s management on the two-pronged strategy of undertaking new business initiatives to foster growth, while simultaneously cleaning up of balance sheet. This has started crystallising the vision of providing value to all stakeholders into a reality.
During the past three years the bank, as an enterprise, has undoubtedly offered great value to its customers and stakeholders. As a result, market capitalisation of the bank has increased manifold. This has elicited strong interest in the market to acquire majority stake in the bank.
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