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Sponsor shares issue

RBS acquisition still deadlocked

By Mushfiq Ahmad

KARACHI: The State Bank of Pakistan continues to deny the MCB Bank approval to its acquisition of the Royal Bank of Scotland Pakistan as sponsor shares have yet to be deposited in a blocked CDC account as required by the central bank.

It had emerged last week that the central bank was unwilling to grant approval to the deal because MCB Bank’s sponsor shares had not been deposited in a Central Depository Company account, a requirement introduced by the SBP on May 22, 2008.

The circular says that in order to ensure continued stake / ownership of sponsors / major shareholders in banks, banks are required to deposit their shares in a Blocked Account with Central Depository Company of Pakistan (CDC).

It adds that no withdrawal of sponsor shares from the blocked account would be allowed without prior written permission of SBP. Blocked accounts were to be opened by the sponsor shareholders of banks exclusively for deposit of sponsor shares and subsequent right and bonus shares issued thereon.

The circular says: “Sponsor Shares mean 5 percent or more paid-up shares of a bank, acquired by a person(s) individually or in concert with his family members (including his spouse, lineal ascendants and descendents and dependent brothers and sisters), group companies, subsidiaries, and affiliates/associates. Such acquisition of shareholding will include all the shares acquired by aforesaid person(s) including, interalia, through (a) as original subscriber / promoter of the bank; (b) subsequent right / bonus issues; (c) market based acquisition deal; (d) reconstruction/restructuring of a bank carried out by SBP; (e) strategic sale through privatization (f) amalgamation of banking companies; or (g) any other mode of acquisition. All shares acquired by common shareholders, who are also sponsor shareholders, of amalgamating banking companies in amalgamation transaction shall be considered Sponsor Shares.

“Sponsor Shareholders mean all those shareholders of a bank holding sponsor shares. The members of the Board of Directors of a bank holding sponsor shares will be considered Sponsor Directors.”

MCB Bank had purchased almost all shares of RBS Pakistan in early August this year for $87 million or Rs 7.2 billion.

MCB Bank acquired 1.707 billion (1,707,107,891) ordinary shares for a cash price of Rs 4.22 per share. As a result of the transaction, the total number of branches of combined MCB and the acquired bank will increase to 1,139. The total consolidated deposits will increase to Rs 413 billion and consolidated gross advances to Rs 324 billion.

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