ISLAMABAD: The Competition Commission of Pakistan (CCP) has given the green light to the acquisition of 100% shareholding of Pakistan International Airlines Corporation Limited (PIACL) by PIA Holding Company Limited (HOLDCO).
The transaction, part of the Government of Pakistan’s privatization process, was reviewed by the CCP in its first phase assessment. HOLDCO, a public limited company wholly owned by the government, will acquire PIACL’s shareholding and specified assets, liabilities, and subsidiaries, including certain real estate assets.
According to the submitted application, the federal government approved the divestment proposal, and the transaction is being carried out through a Scheme of Arrangement filed with the Securities and Exchange Commission of Pakistan (SECP).
While core aviation activities and allied services will remain with PIACL, non-core assets, including real estate, will be transferred to HOLDCO. However, these assets constitute a statistically insignificant portion of the total real estate market in Pakistan.
The CCP determined that the proposed transaction will not lead to HOLDCO’s dominance in the relevant market and authorized it under Section 31(1)(d) of the Competition Act. Matters falling outside the CCP’s purview will remain subject to applicable laws.
It is pertinent to mention that the order, dated May 3rd, 2024 of the Competition Commission of Pakistan (CCP) in its first phase review in the matter of acquisition of 100 percent shareholding of M/s Pakistan International Airlines Corporation Limited by M/s PIA Holding Company Limited), has cleared the way for the completion of the acquisition, marking a significant development in Pakistan’s aviation sector restructuring.
According to available documents, on 8th April, 2024, the CCP received a pre-merger application submitted jointly by the following parties:
a. M/s PIACL and
b. M/s PIA Holding Company Limited (HOLDCO)
The application was made pursuant to Section 11 of the Competition Act, 2010 read in conjunction with Regulation 6 of the Competition (Merger Control) Regulations, 2016 (Merger Regulations).
The proposed transaction curtails acquisition of 100pc shareholding of PIA by the HOLDCO pursuant to Scheme of Arrangement as part of the Government of Pakistan’s privatization process.
The Commission has examined the application as well as all the documents and information provided by the concerned undertaking(s). The Phase 1 competition assessment of the intended transaction has revealed the following facts:
The business activities of the undertakings concerned are:
HOLDCO: A public limited company incorporated in Pakistan and is wholly-owned by the GoP through its nominees i-e Secretary Aviation Division, Secretary Privatisation Division and Secretary Finance Division. It has recently been incorporated to succeed to specified assets, liabilities and subsidiaries of PIA including specific business, property, rights, liabilities and obligations of PIA both inside and outside Pakistan.
Pakistan International Airlines Corporation Limited (PIACL): A public listed company incorporated in Pakistan is envisaged in the provision of Aviation and allied services including engineering, handling, cargo, flight kitchen and training.
As per the submitted application, the federal government approved the proposal contained in the summary titled “Divestment of PIACL-Legal Segregation Plan and Transaction Structure” submitted by the Privatisation Division vide its decision on 06th February 2024.
The transaction is being effected by the way of a Scheme of Arrangement filed by PIA and HOLDCO before the SECP pursuant to Section 279-282 and 285(8) of the Companies Act, 2017 on 28th March 2024.
As approved by the federal government, PIA is to undergo a restructuring process through the Scheme. As per the Scheme, HOLDCO will be transferred 100% shareholding of the PIACL. Additionally, Non-Core Assets and Non-Core Liabilities will split from PIA and it will also be transferred to the HOLDCO.
The relevant market in this case has been identified as “Real Estate” while the relevant geographic market is Pakistan as properties owned by PIA are across the country where the conditions of competition are sufficient homogenous.
The core aviation activities and allied services are not being transferred through the Scheme and will remain with PIA. The Non-Core Assets being transferred to HOLDCO includes real estate. Furthermore, these Non-Core Assets represent statistically insignificant portion of the total real estate market in the relevant geographic market.
The proposed transaction will not result in dominance of the HOLDCO in the relevant market, post-transaction, as determined under Section 2 (1) (e) read with Section 3 of the Act. Therefore, it is hereby authorized under Section 31 (1) (d) of the Act.
In the subject transaction, matter which may fall outside the scope of the Competition’s purview, remain subject to applicable laws. It is so ordered, said order of the CCP dated May 3, 2024.
