Fauji Foundation has withdrawn from the bidding process to acquire Pakistan International Airlines Corporation Limited, leaving three bidders in the race ahead of the submission and opening of bids scheduled for December 23, according to the Privatisation Commission Chairman and Adviser to the Prime Minister on Privatisation, Muhammad Ali.
During an interview with a digital news platform, Muhammad Ali said Fauji Fauji Foundation had opted out of the process, and there are three bidders remaining in the race.
Explaining further, the SAPM stated that there was no lack of interest from the Fauji group, since it met the bidding criterion. “If two participating consortia join hands after the bidding is done, that is considered a collusive practice. But since Fauji has now withdrawn from the bidding process, they may or may not choose to join the winning bidder later”, said the SAPM, hinting at a post bidding merger.
Sharing the details to keep the bidding process fair and transparent, the privatisation advisor said sealed bids would be placed in a transparent box after submission, followed by a meeting of the Privatisation Commission board to determine the reference price. Bids will be submitted between 10:45 am and 11:15 am on December 23, while the opening of bids will take place at 3:30 pm and will be broadcast live, as decided earlier by the government.
As the Fauji Fertilizer opts out of the bidding, the remaining bidders include a consortium comprising Lucky Cement Limited, Hub Power Holdings Limited, Kohat Cement Company Limited and Metro Ventures (Private) Limited; another consortium comprising Arif Habib Corporation Limited, Fatima Fertiliser Company Limited, City Schools (Private) Limited and Lake City Holdings (Private) Limited; and a standalone Air Blue (Private) Limited.
Muhammad Ali said that the reference price will be reviewed and approved by the Cabinet Committee on Privatisation and announced at the time of bid opening. If bids exceed the reference price, an open auction will be held, while bids below the reference price will be assessed by giving preference to the highest offer.
Following the bidding, the federal cabinet is expected to approve the transaction within days. The Privatisation Commission will then proceed with signing documents submitted by bidders and will have 90 days to complete procedural requirements, including the transfer of assets, liabilities and leased aircraft.
Under the transaction structure, bidding is based on a 75% stake in PIA. Of the proceeds, 92.5% will go to PIA, while 7.5% will be transferred to the national exchequer. The government will retain the remaining 25% stake, with the successful bidder given the option to acquire it later.
The valuation of the remaining 25% shares will take place after finalisation of the 75% transaction. Bidders may opt to acquire the remaining stake by paying a 12% premium or leave it with the government as previously announced. However, Muhammad Ali confirmed that, the bidders have to finalise the decision of whether they want to acquire the remaining 25% or not, within the stipulated 90-day period.
The winning bidder will be required to deposit two-thirds of the bid amount within 90 days, with the remaining one-third payable within one year. The government rejected a proposal allowing payment over a full year, citing risks linked to changes in the airline’s performance.
The privatisation advisor also shared that no asset owned by the PIA will go to the successful bidder. He said that the government has planned to ensure a clean and focused aviation business, by keeping other assets off the table.
PIA currently operates 18 aircraft out of a total fleet of 34 and holds air service agreements with 97 countries, along with landing rights in more than 170 countries. The airline reported a net profit of Rs11 billion and equity of Rs30 billion, while liabilities of Rs26 billion will remain with PIA and be paid over five years.
Under the proposed terms, no employee can be laid off for one year, with pensions and employee benefits protected. Pension liabilities of retired employees, including medical benefits and discounted tickets, will be borne by the holding company.
PIA’s workforce has declined from 11,500 employees in 2011 to 6,500. The adviser said private-sector management is required for investment, fleet expansion and operational decisions, which the government is unable to undertake.
