PIA Privatization: 3 Bidders Compete as Fauji Fertilizer Pulls Out

The Privatization Commission is set to proceed with the privatization of Pakistan International Airlines Corporation Limited (PIAC) on December 23, with only three bidders remaining in the race following the withdrawal of Fauji Fertilizer Company Limited. According to the programme circulated by the Privatization Commission on Sunday, bids will be submitted between 10:45 am and 11:15 am, while the opening of bids is scheduled for 3:30 pm. The bid-opening process will be broadcast live on television networks, as directed by the government. The remaining bidders include a consortium comprising Lucky Cement Limited, Hub Power Holdings Limited, Kohat Cement Company Limited, and Metro Ventures (Private) Limited; a second consortium comprising Arif Habib Corporation Limited, Fatima Fertilizer Company Limited, City Schools (Private) Limited, and Lake City Holdings (Private) Limited; and Air Blue (Private) Limited. Muhammad Ali, Chairman of the Privatization Commission and Adviser to the Prime Minister on Privatization, confirmed during a YouTube interview that Fauji Fertilizer Company had opted out of the bidding process. Explaining the procedure, Ali said that after the bid submission on Tuesday, the sealed bids will be placed in a transparent box, following which the board of the Privatization Commission will meet to determine the reference price. The Cabinet Committee on Privatization (CCoP) will then approve the reference price, which will be announced at the time of bid opening. If the submitted bids exceed the reference price, an open auction will be held. However, if the bids fall below the reference price, the highest bidder will be given priority, he said. Following the bidding process, the federal cabinet is expected to approve the transaction within days. This will be followed by the signing of transaction documents submitted by the bidders. The Privatization Commission will then have up to 90 days to complete procedural requirements, including the transfer of assets, liabilities, and leased aircraft. Under the transaction structure, the bidding will be conducted for a 75 percent stake in PIA. Of the proceeds from the 75 percent sale, 92.5 percent will be reinvested in PIA, while the remaining 7.5 percent will be allocated to the national exchequer. The government will retain the remaining 25 percent shareholding, which Ali described as a valuable asset. However, the successful bidder will have the option to acquire the remaining shares or leave them with the government. According to Ali, the valuation of the remaining 25 percent stake will be determined after the completion of the 75 percent sale. Bidders will have the option to acquire the remaining stake within 12 months at a 12 percent premium. While a decision on the 75 percent stake must be made on Tuesday, bidders will have up to 90 days to decide on acquiring the remaining shares. Ali said bidders had requested to spread payments for the 75 percent stake over one year, a proposal rejected by the government. He explained that such an arrangement would unfairly expose the government to downside risk if PIA’s performance deteriorated, while allowing bidders to benefit if performance improved. Under the agreed structure, the winning bidder will deposit two-thirds of the bid amount within 90 days, with the remaining one-third payable within one year. PIA currently operates 18 aircraft out of a total fleet of 34 but holds air service agreements with 97 countries and landing rights at more than 170 destinations worldwide. The airline currently reports a net profit of Rs. 11 billion and equity of Rs. 30 billion. Liabilities amounting to Rs. 26 billion will remain with PIA and will be paid by the successful bidder over a five-year period.