Arif Habib consortium wins PIA privatisation bid with Rs135b offer

Arif Habib Consortium has acquired Pakistan International Airlines for Rs135 billion in the second and final round of the auction for the privatisation of the national carrier, while the Lucky Cement Consortium emerged as the second-highest bidder with an offer of Rs134 billion.

Following the conclusion of the first round, in which two bidders, Arif Habib Consortium and Lucky Cement, offered above the government’s reference price of Rs100b.

The government’s approved reference price for the 75% stake is Rs100b, and the first round of bidding saw competitive offers from pre-qualified bidders.

Lucky Cement had submitted a bid of over Rs101.5b and had signed the record sheet. Airblue had followed, with its representative announcing a bid of Rs26.5b aloud. All bids were recorded and signed on the official sheets, with Arif Habib having emerged as the highest bidder among the three.

The bidding process for the privatisation of PIA intensified in the second round as competing Arif Habib Consortium and Arif Habib Consortium repeatedly raised their offers during the final round of the auction.

The Lucky Consortium initially increased its bid to Rs125b, prompting the Arif Habib Consortium to raise its offer to Rs126b. The competition continued as the Lucky Consortium enhanced its bid to Rs128b, while the Arif Habib Consortium responded with an offer of Rs129b.

The bidding war further escalated when Lucky Cement submitted a Rs130b offer, which was countered by Arif Habib at Rs131b. Lucky Cement further raised its bid to Rs132b, while Arif Habib moved ahead with Rs133b.

In the final stage of the auction, the Lucky Cement Consortium submitted a bid of Rs134b. However, the Arif Habib Consortium outbid them with a final offer of Rs135b.

Following the conclusion of the auction process, the Arif Habib Consortium was declared the successful bidder for the acquisition of Pakistan International Airlines.

PM hails successful PIA privatization

Prime Minister Muhammad Shahbaz Sharif expressed gratitude over the successful bidding for the 75 per cent privatisation of Pakistan International Airlines (PIA) shares and congratulated the nation on what he described as a important milestone.

The prime minister said that upon assuming office, he had pledged to initiate the privatisation of state-owned enterprises, terming the privatisation of PIA a significant step towards fulfilling that commitment. He emphasised that the bidding process was conducted in a fully transparent manner.

He noted that the privatisation of PIA, along with other state-owned entities, would play a vital role in stabilising the country’s economy and restoring investor confidence. “We thank Allah Almighty. With the cooperation of all state institutions, the national economy is being strengthened,” the prime minister said.

Reaffirming the government’s policy direction, he said the administration remained committed to working with the private sector to promote national development, prosperity and public welfare.

PIA long accused by critics of being bloated and poorly run, has found funds drying up as the government struggles with a balance of payments crisis.

Read: All set for auction of PIA’s 75% shares today

The sale offer comes after last year’s privatisation attempt failed with just one bid for $36 million — far below the $300 million-$305 million wanted by the government.

Before being de-listed from the Pakistan stock exchange, the airline reported a net loss of $437 million for the 2022 full year on revenue of $854 million.

Goal is to make PIA ‘best-in-class’, says Muhammad Ali

Prime Minister’s Adviser on Privatisation and Chairman of the Privatisation Commission Muhammad Ali said the government’s objective was “not merely to sell PIA and collect money, but to turn it into a best-in-class airline.” He said the airline required fresh investment to regain its lost position, adding that the transaction structure had been revised accordingly.

Muhammad Ali said a payment schedule had been finalised under the new privatisation plan. “Two-thirds of the payment will be made upfront, while the remaining amount will be paid later,” he said, adding that “the outstanding amount has also been secured through safeguards.”

Addressing a ceremony, he said the privatisation of PIA would pave the way for privatisation of other state-owned entities. “In April, the government decided to sell 51 to 100 per cent of shares, and our aim was to attract as many bidders as possible,” he said. He added that the current bid was for a 75 per cent stake, while “the buyer will also be allowed to purchase additional shares.”

“The first phase of the bidding process has been completed; now the matter will go to the Privatisation Commission,” said Privatisation Commission (PC) Chairman Muhammad Ali. The bids came from pre-certified bidders Lucky Cement, private airline Airblue and investment firm Arif Habib. Fauji Fertiliser and other bidders have pulled out of the auction.

The PC board reviewed and approved the reference price (the minimum price of sale), the exact figure of which remains confidential. Ali said that once the reference price is approved by the board, it will be forwarded to the Cabinet Committee for final approval.

Once the Cabinet approved the reference price, the federal cabinet ratified it.

With the successful bidder now identified, the bidder will have 90 days to purchase the remaining 25% of shares. The government had taken responsibility for PIA’s liabilities of Rs 654 billion last year. The investor is required to commit an investment of Rs80 billion over the next five years, and of the proceeds from the sale of 75% of PIA’s shares, 92.5% will be allocated to the airline for reinvestment, while the remaining 7.5% will be transferred to the government.

The government claims that this privatisation is crucial for the airline’s financial health and profitability. “No major privatisation of a national asset has taken place in the last 20 years, making this move historic for Pakistan,” Ali said.

Additionally, the PC has stated that employee job security will be guaranteed for one year. The holding company will be responsible for managing pension plans and post-retirement benefits.

Founded in 1955, PIA was a symbol of national pride and rapid growth for years, but its reputation has suffered due to financial losses and safety lapses.

It was banned from flying to the European Union, Britain and the United States in June 2020, a month after one of its Airbus A-320 jets crashed onto a Karachi street, killing nearly 100 people.

Europe and Britain allowed PIA flights to resume this year, but operations have not yet resumed for the United States.

Just 18 of its fleet of 34 planes are in active service, according to officials.