Consortium may complete Saudi Pak Bank deal in a fortnight

by Richard Kilner

Story link: Consortium may complete Saudi Pak Bank deal in a fortnight

Speculation is mounting that a consortium, including Nomura Holdings and Bank Muscat, could complete a deal to in the next fortnight to acquire a majority share in the Saudi Pak Bank of Pakistan.

The stake is estimated to cost as much as $218m, according to banking insiders. It is rumoured that the deal could see shares going for 27 or 28 rupees.

Pakistan’s banking sector has attracted much foreign interest following a series of reforms and good performances which have led to rapid expansion and increasing income.

Presently only Islamic banking is able to gain new banking licences meaning that the only way foreigners can get into the market is to buy their way in.

Shaukat Tarin, a Pakistani financier, is leading the consortium which includes the World Bank’s private sector branch, International Finance Corp.

An anonymous banker has stated the consortium wishes to acquire anywhere from 75-95% of the bank, with Bank Muscat taking 35%, the International Finance Corp 20% and Nomura 10%.

The remaining shares are expected to be taken up by local partners, led by Tarin.

Should the buyers get a 95% stake at 28 rupees per share the total cost would be $218m, approximately 2.8 times the Saudi Pak Bank’s net asset value.

Some observers had feared that the country’s current political situation could scare off foreign investors, but the deal appears to be going ahead regardless of the emergency rule imposed by President Musharraf.

One reason why the deal seems to be going ahead is that it has been in the pipeline for the last six months. In addition, the potential risk in Pakistan is seen differently by Middle Eastern or Far Eastern investors, banking sources have said.