The government has taken the decision to divest its 18.3pc stake in Mari Petroleum Company Limited (MPCL) after two joint venture partners Fauji Foundation (having 40pc stake) and Oil and Gas Development Company (OGDC) (having 20pc stake), could not settle at the share price approved by the Cabinet Committee on Privatization (CCoP).
The CCoP has granted the government the permission to hire a financial advisor to carry out the transaction. Aziz Nishtar chaired the board meeting in the absence of a new privatisation chairman.
However, it remains ambiguous whether the government would be reaching out on the Pakistan Stock Exchange (PSX) for divestment of shares or will be tapping international markets. However, it is likely that the government will be divesting shares domestically since Mari Petroleum is not listed on the London Stock Exchange.
The CCoP had approved the transfer price for selling 18.3pc stake at a 5pc discount to the closing stock price on the day prior to which the transfer notice had been served to the joint-venture partners. The stock stood at a price of Rs1, 427 that day, translating into transfer price of Rs1,355 per share. However, the joint venture partners considered the government’s valuation as “overpriced”.
The stock price of Rs1, 355, would have yielded a minimum of Rs25b which the government would have utilised to finance the prevalent budget deficit.
During the board meeting, the CCoP observed that if the joint-venture companies were unable to strike a deal for the purchase of the stake, the government would be unable to float the shares at a price below the offered price.
The MPCL is managed by Fauji Foundation despite the company holding a controlling stake of 40pc of total shares. Sources have been reported to have said that Fauji Foundation insists that in line with the 1985 agreement, the company continues to manage MPCL even after the divestment of the government’s stake in the company. At present, 20pc shares in MPCL are held by the public.
Contrary to Fauji Foundation’s plea, the board members stated that the company will be managed by the entity with the majority shares. In such a case where there is a dispute between the shareholders and the Companies Ordinance, the law shall be given precedence.
