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Saudi Pak Bank purchase deal seen in two weeks

KARACHI - A consortium including Japan’s Nomura Holdings and Bank Muscat could sign a deal within two weeks to buy a majority stake in Pakistan’s Saudi Pak Bank for as much as $218 million, bankers with knowledge of the transaction said on Wednesday.

Foreign buyers have been attracted by the Pakistani banking sector’s strong performance and financial reforms that have laid the platform for rapid growth and rising incomes.

As no new banking licences are being issued, except for Islamic banking, foreigners must buy their way into the market.

The consortium, led by Pakistani financier Shaukat Tarin, also includes International Finance Corp (IFC), the World Bank’s private sector arm. The deal could be finalised at 27-28 rupees a share, the bankers said.

“The buyers are looking to acquire anywhere between 75 and 95 percent of the bank,” said one banker, who asked not to be named.

Bank Muscat is likely to buy a 35 percent stake, Nomura 10 percent and IFC 20 percent. The rest is expected to be bought by local partners led by Tarin, said another banker.

“The sale purchase agreement for the deal is likely to be signed pretty soon, maybe in two weeks from now,” said the first banker.

At 28 rupees a share, a 95 percent stake in the bank would be worth about $218 million. The price would be around 2.8 times Saudi Pak Bank’s current net asset value.

Saudi Pak Bank shares were trading down 1.6 percent at 25.45 rupees at 0755 GMT on the Karachi Stock Exchange (KSE).

No high risk premium

Britain’s Standard Chartered, whose local arm is listed on the KSE, last year bought Union Bank for $487 million in the biggest deal in the sector so far, paying 5.6 times net asset value.

Tarin was president of Union Bank at the time of the deal.

Some analysts had feared that Pakistan’s current political uncertainty, with emergency rule imposed by President Pervez Musharraf earlier this month, could deter foreign buyers, but the Saudi Pak deal is likely to go through regardless.

“Talks on this deal have been going on for more than six months, so it was very unlikely this deal would have been affected by the political situation,” said a banker.

“Also, the risk perception of Pakistan for the Middle Eastern investors is pretty different from the West or the Far East,” he said.

Other buyers in Pakistan in recent years include Dutch ABN AMRO, NIB Bank Ltd., a subsidiary of Singapore state investor Temasek Holdings, and Saudi Arabia’s Samba Financial Group