The Privatization Commission (PC) board on Friday approved the hiring of an Ernst & Young-led consortium to prepare a plan to privatize Pakistan International Airlines (PIA), as the government sought to sell the loss-making company to the ground . of February.
The decision to select the leading firm as a financial adviser came a day after Pakistan told the International Monetary Fund (IMF) that it would complete the transaction as soon as possible.
The board’s decision marked the achievement of the first major milestone, although some issues would be decided by a bargaining committee on success pay and the commitment to meet deadlines. The actual fee will be known after an agreement with the company.
A PC board meeting, chaired by Federal Minister for Privatization Fawad Hasan Fawad, approved the appointment of a financial advisor for the divestment of Pakistan International Airlines Corporation Limited (PIACL), according to a statement issued by the privatization ministry. .
He added that based on set criteria, the evaluation committee declared the consortium led by Ernst & Young as the “first place interested”. The board formed a negotiating committee and asked it to enter into a financial services agreement with the highest bidder.
Reading Eight global companies offer PIA privatization services
The ministry said eight interested parties submitted technical and financial proposals to be hired as a financial consultant.
Sources said that of the eight, four qualified for the technical round and the Ernst & Young and Haidermota consortium topped the list. The other three firms included Rothschild & Co, Houlihan Lokey and Ceabury Securities.
Haidermota was a partner of Dubai Islamic Bank (DIB) which had done a detailed assessment of PIA a few years ago when the entity was on the active privatization list. The new financial advisor is required to update the DIB study and make the entity ready for sale in approximately two months.
The caretaker government plans to split PIA into two entities and is keen to sell key assets by the end of February – weeks after the caretaker government’s term ends on February 8. government comes to power, it can go ahead with plans to sell the majority stake.
Sources said there were still some outstanding issues, which the negotiating committee would sort out during its engagements with the consortium ahead of the financial advisory agreement.
A day earlier, the privatization ministry had assured the IMF that the privatization of PIA was its top priority and would try to complete it as soon as possible.
“We will try to sell the core of PIA by the end of February, but without deviating from the legal course,” the privatization minister said. He added that it could take 20 to 26 weeks to assess the value of all PIA’s assets.
PIA suffered losses of Rs 86 billion last year and this year’s estimate is a staggering Rs 153 billion, making privatization or landing of the airline a necessity. The government is considering selling at least 51% of the shares along with management control.
The board also decided to extend the financial advisory contracts of two firms hired earlier for the privatization of House Building Finance Company (HBFC) and First Women Bank Limited (FWBL).
Published in The Express Tribune, November 11u2023.
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