Listed SOEs: Govt likely to offer block trade of shares

ISLAMABAD: The government is likely to offer Block Trade of Shares of the listed State Owned Entities (SOEs) to institutional investors including governments and/ or government entities, sources close to Secretary Privatisation told Business Recorder.

Sharing the details, sources said that in a note for Secretary to the Prime Minister regarding the G2G commercial transactions, the Prime Minister directed to place the matter before Cabinet Committee on Privatisation (CCoP).

On May 07, 2022, in a meeting chaired by the Federal Minister for Finance and Revenue, the then Deputy Chairman Planning Commission presented a proposal for G2G transactions or negotiated sale of assets of the Federal Government through Privatisation Commission (PC).

On the directions of the Finance Minister, a follow up meeting of the stakeholders was held on May 09, 2022. The meeting attendees resolved to proceed with the fast-track hiring of financial/ transaction advisors and promulgation of a new law for G2G transactions as the Privatisation Commission Ordinance 2000 (Ordinance) does not have any provision for negotiated and non-competitive sale.

Preamble of the Ordinance specifically contains the purpose of the law, which is to provide for a fair and transparent process of privatisation to secure transactions. In terms of section 5(0) of the Ordinance, it is mandatory for PC to invite applications for privatisation and ensure widest possible participation.

Section 23 of the Ordinance mandates the publication of notice of privatisation at least eight times in at least four newspapers (02 English & 02 Urdu) with wide national and international circulation. Similarly, section 26 of the Ordinance makes publication of a privatisation transaction mandatory.

The rules and regulations of PC provide further safeguards for undertaking the transparent and competitive process of privatisation. These express provisions of the Ordinance and its regulatory framework take negotiated sale out of the purview of PC that is not a result of a competitive and transparent process.

On the directions of the Finance Minister, PC initiated the process of preparing a draft legal framework for negotiated G2G transactions. The basic structure of the proposed legislative framework for G2G, transactions was shared with the Prime Minister’s office and presented on June 08, 2022 and the Prime Minister desired to place it before the CCoP.

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In consultation with stakeholders, PC has drafted the basic structure of the proposed G2G legal framework for consideration of CCOP.

Salient features of the proposed structure may include the following: (i) G2G framework agreement/ MoU between Government of Pakistan (GoP) and foreign Government; (ii) Cabinet directive to PC to commence process for G2G transaction for a specific state-owned enterprises (SOE), property or shares; (iii) fast track hiring of Transaction Advisors (TA); (iv) evaluation, price discovery, transaction structure and preparation of transaction documents by TA; (v) approval of the transaction structure and Negotiation Committee (to be appointed by the Cabinet);(vi) negotiations and finalization of the deal with the approval of the cabinet; and (vii) robust conflict of interest provisions, complete public access to information after the deal and provision of legal protection to those involved in the transaction.

PC has also prepared basic structure or salient features of the proposed legislation along with a tentative timeline outlining steps on best efforts basis for G2G transaction(s) of shares of publicly-listed SOEs.

There are many dependencies, variables and role of different stakeholders involved in the process, and the proposed timelines are dependent upon seamless execution. If basic structure for the proposed legal framework is approved in principle, the PC will be able to draft and initiate the process of legislation within 07 days of such approval.

As an alternate proposal, PC has recommended a competitive transaction for the Block Trade of Shares of the listed SOEs to Institutional Investors including, governments and/ or government entities as per the existing law, rules & regulations without any new legislation/ Ordinance.

PC has streamlined the hiring process of Financial Advisers (FA) through amendments in the hiring of Financial Advisers Regulations 2018 in its Board meeting held on 21 June 2022. PC can swiftly run the block trade capital market transactions on fast track in a matter of 04 to 06 weeks after the hiring of FA but subject to interest from international institutional investors and requisite approvals to participate in the process of such a block trade.

Key activities of PC may include: (i) CCoP direction for sale/ privatisation of shares in relevant publicly traded/ listed SOEs; (ii) due diligence by PC appointed FA; (iii) determination of block trade/ privatisation features and pricing mechanism; (iv) announcements and notices required as per the applicable law/ regulations; and (v) appointment of brokers/ consultants by buy-side, if required, leading to completion of the sale and settlement. On 22 June 2022, Finance Division has conveyed that as a follow up to the Prime Minister’s visit to United Arab Emirates (UAE), a UAE delegation has shared a presentation for potential investments in Pakistan.

PC has requested CCoP to decide the most suitable course of action to attract potential foreign direct investments in Pakistan. CCoP may also issue appropriate directions to the line Ministries to bring specific proposals for divestment of identified number of shares for the companies.

Copyright Business Recorder, 2022