The Citigroup/ Goldman Sachs consortium has been awarded the contract for Oil and Gas Development Company (OGDC) global depository receipts (GDRs) as it agreed to take the job as lead manager for Rs 833 million transaction fee and cost.
OGDC GDRs is Pakistan''''s second (PTCL first) transaction in the world market and its good response can encourage it for many more such offerings in the future.
The Privatisation Commission had conceived the idea of floating OGDC GDRs in the international stock market in 2004. The idea is basically a case to test worth of the organisation in the international market to decide whether or not it should be privatised.
After completing legwork, the Privatisation Commission sought bids from the reputed international banks and consortiums to appoint lead manager for the offering. Its response was encouraging. Finally, this process led to short-listing of four globally reputed banks and consortiums.
The Privatisation Commission evaluated the bids of the interested consortiums and banks to pick one as the lead manager for the transaction. It set two criterions - based on technical and financial bids - carrying 85 and 15 marks respectively.
Deutsche Bank got 15 marks for its lowest financial bid of Rs 833 million. The Citigroup/Goldman Sachs consortium beat all the others in the race by getting 85 marks for its technical bid.
Sources said the Privatisation Commission referred the bidders'''' evaluation report to the Cabinet Committee on Privatisation (CCoP) for its guidance.
The committee discussed the issue in detail in its one of the meetings and directed the Privatisation Commission to ask the Citigroup/Goldman Sachs to match Deutsche Bank''''s lowest financial offer to qualify for the job.
As per CCoP directions, the Citigroup/Goldman Sachs consortium was asked to match the lowest bid and its response was positive. However, after issuance of mandate to Citigroup/Goldman Sachs, the Privatisation Commission received an unsolicited offer from Merill Lynch/ABN Amro to undertake the GDR offering for Rs 750 million.
Sources said the Citigroup/Goldman Sachs has suggested the government to undertake GDRs offering by September 2006 for getting a better response from the international market. However, the government of Pakistan would like the process to be completed before the end of the financial year in order to reduce the current account deficit and retire government borrowing for budgetary support from the State Bank of Pakistan. As per government decision, Citigroup/Goldman Sachs has expressed their willingness to expedite the floatation by June 2006.
As lead manager, Citigroup/Goldman Sachs will have multiple role to make the offering a success. It will suggest Islamabad for picking up any world stock market for listing of GDRs besides deciding its size.
Sources said the lead manager will also be responsible of promoting Pakistan''''s image in the world market, besides reporting and maintaining the books of the offering on behalf of OGDC.