NIB shareholders to challenge deal with Bugis

By Farhan Sharif

KARACHI: Small shareholders of NIB Bank are set to challenge a recent strategic sale of 213 million shares to a Singaporean group as they fear forfeiture of their rights of further investment and fall in market value of the shares.

They fear the deal approved recently by the board of directors of NIB bank for issuing 213 million shares to Tamesak Group of Singapore through their subsidiary Bugis Limited of Mauritius could harm the interest of minority shareholders. They plan to file an appeal to the regulating authority against the NIB board, sources in Karachi Stock Exchange (KSE) told Daily Times. “The deal could harm interests of the small investors,” said a source.

The offering of new shares to attract investment is usually done through issuance of right shares or new shares with public offering in order to provide equal opportunity to the investors. However, the current decision to issue over 213 million shares to a new party without offering it or any part of it to general public or existing shareholders would harm investors’ confidence.

An equities analyst, requesting anonymity, said the NIB Bank has issued a notice for passing a special resolution for the issue of 213,248,077 shares to the Tamesak Group of Singapore through their subsidiary Bugis Limited of Mauritius. He said new shares are normally offered as rights shares to all shareholders. However, the abovementioned 213 million shares are being offered exclusively to Bugis Limited, a subsidiary of Tamesak. The proposed issue of 213 million shares is at a price of Rs 13 per share as against the current price at around Rs 30 per share to Rs 35 per share.

This deal will allow Tamesak to take over NIB bank through the backdoors at a throwaway price. Some of the previous sponsors of the bank have already sold 25 percent to Tamesak in December 2004 at a price of around Rs 20 per share when the KSE 100-share index was below 6,000 points level and the market price of the company’s shares at that time was below Rs 20 per share.

The old sponsors co-opted the representatives of Bugis and thereafter resigned from the board. Thus the bank is now controlled by Tamesak.

The old sponsors have also entered into an agreement with Bugis to support the proposed resolution by using their shareholding in the bank.

At the management level the voting power of Bugis in NIB will go up to 72.5 percent (around three times of their existing voting power) from the existing 25 percent and it will reduce voting power of all the other shareholders to about one-third of their existing voting power. That would be a big disadvantage to all the minority shareholders currently holding 75 percent shares.

There is a law in Pakistan to protect minority shareholders under such circumstances, with Companies Ordinance 2002 for the listed companies covering issue related to substantial acquisition of voting shares and takeover. However, the transaction seems to have been structured to circumvent the law and its spirit.

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