Source: Guardian

By Faisal Aziz

KARACHI, Jan 7 (Reuters) - A consortium including Bank Muscat and Japan’s Nomura Holdings <8604.T> has agreed to buy 85 percent of Pakistan’s Saudi Pak Bank for about $200 million, a banker involved in the deal said on Monday.

The bid group, led by Pakistani financier Shaukat Tarin, also includes International Finance Corp, an arm of the World Bank.

The deal is the latest foreign venture in Pakistan’s strongly performing banking sector, where financial reforms have laid the platform for rapid economic growth and rising incomes. It went ahead despite renewed political crisis in Pakistan after the killing of opposition leader Benazir Bhutto on Dec. 27, which unleashed a wave of violent unrest and threatened to scare off foreign investment and derail the recent growth.
Saudi Pak Industrial and Agricultural Investment Co., the unlisted parent of Saudi Pak Bank, confirmed the deal.

“We will be selling them 68.01 percent of the bank that we hold at 29.30 rupees a share,” Rashid Zahir, the company’s chief executive, told Reuters.
That price is nearly an 8 percent premium to Saudi Pak’s last closing share price. The small lender has a market capitalisation of about $177 million.
A source in the bid group said the consortium had reached agreements to buy another 17 percent from local investors.
“We will be buying 85 percent of the bank now, and issuing a tender offer for the remaining shares pretty soon,” the source said, adding that deal was expected to close by mid-February.
Under Pakistani law, a purchase of 25 percent or more of a listed company can trigger a mandatory takeover offer.
HIGH RISK?
At 29.30 rupees a share, the price is around 2.8 times Saudi Pak Bank’s last reported net asset value per share. This would be in line with recent bank deals despite some concerns over the bank’s bad loans, said Asif Qureshi, head of research, Invisor Securities.
Saudi Pak Bank’s shares were up 4 percent up at 28.30 rupees at 0652 GMT while Bank Muscat stock was down 1.6 percent.
The source said Bank Muscat would end up with a 35 percent interest in Saudi Pak Bank, IFC 20 percent and Nomura Holdings 13 percent through its subsidiary Nomura European Investment Ltd.
Pakistan’s banking sector has more than doubled in total assets over the past five years to 4,884 billion rupees ($78.6 billion), according to central bank data.
The strong performance has attracted global and regional banks, including Britain’s Standard Chartered , Dutch ABN Amro , Singapore state investor Temasek Holdings [TEM.UL] and Saudi Arabia’s Samba Financial Group <1090.SE>.
Standard Chartered, whose local arm Standard Chartered Bank Pakistan Ltd is listed on the Karachi Stock Exchange, bought Union Bank for $487 million in the biggest deal in the sector so far, paying 5.6 times net asset value.
Last month, the Pakistani central bank granted a banking licence to Barclays , the second largest global bank by assets. Barclays plans to operate with capital of $100 million and will initially open up 10 branches in various cities.

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Tags: Bank Muscat, Benazir Bhutto, Political crisis, Saudi Pak Bank