ISLAMABAD, Dec 29: The government sold country’s second largest commercial bank — Habib Bank Limited — on Monday to Aga Khan Fund for Economic Development (AKFED) for Rs22.409 billion.

The AKFED submitted highest bid of Rs22.409 billion to take over 51 per cent strategic stake along with management control of the HBL, which has consumed around Rs22.5 billion of the national kitty since 1999 for turn around in its balance sheet.

Although the reserve price of the bank fixed by the cabinet committee on privatization (CCOP) was not disclosed, the privatization minister and secretary termed it a successful bid because it met the minimum price target.

The Supreme Council for Economic Affairs and Investment (SCEAI) of the State of Qatar offered a bid of Rs21.993,750 billion, which is around Rs415.250 million lower than the highest bid.

With this transaction, Pakistan’s 80 per cent banking sector has now gone to the private sector. This was the largest single privatization transaction in the history of Pakistan, said Privatization Secretary Ahmad Waqar.

Central Insurance Company Limited of Hussain Dawood, the third pre-qualified bidder did not turn up for the bidding and there was no explanation from the privatization commission on its conspicuous absence.

Privatization and Investment Minister Dr Abdul Hafeez Sheikh immediately closed the transaction, saying it was a “successful closure” because the highest bid met the minimum price requirement.

Established in 1947, the bank had a negative equity in 1999 after having been grown into the country’s second largest commercial bank. The government injected Rs9.7 billion and Rs8 billion in the bank in two instalments to improve its balance sheet.

This is besides provision of another Rs4.8 billion for reduction in staff strength from over 30,000 to 20,000 through voluntary separation scheme (VSS). Last year, the bank declared an after-tax profit of Rs2.1 billion.

The whole bidding process lasted for about 10 minutes. The privatization secretary told the gathering at the outset that the two bidders would offer unconditional sealed bids to be opened at the spot.

He said if the bid met the minimum price requirement set by the government, it would be taken straight away to the privatisation commission board (PCB) on Tuesday and then to the CCOP with the recommendation to approve the highest bid.

In case, the bid did not match the reserve price, then the bidders would be asked in the second round to improve their bids to meet the official target, he said, adding that the reserve price had been put in a sealed envelop and would be opened on request.

After the sealed bids were opened by the mediamen, Dr Hafeez Sheikh and the privatization secretary said it met the government target and, hence, there was no need to hold second round of bidding for improvement and would be taken straight to the PCB on Tuesday and subsequently to the CCOP for formal app-roval. “Now, there is no need to disclose the reserve price because the bid has met our requirement,” said Mr Ahmad Waqar.

They said the AKFED would be issued a formal letter of acceptance of their bid within 30 days after meeting formalities from the PCB and the State Bank of Pakistan.

They said the bidding was held in a transparent manner and the prequalified bidders were made fully aware of the whole process in advance.

Iain Cheyne, the AKFED director, said the bidding process was transparent and hoped this would establish a good working relationship between the fund and the Pakistan government.

Ahmad Al-Saeed, the legal director of SCEAI said it provided his side a good opportunity to look very closely the working environment in the privatization commission although they lost the competition. He said his side would wait for the transaction’s approval and compete if second round of bidding was held.

The HBL is Pakistan’s second commercial bank with more than 1,400 branches in the country besides 48 branches in 26 countries in Europe, the Middle East, Far East, Asia, Africa and the US.

It also operates three wholly owned subsidiaries, namely, Habib Bank Financial Services, Habib Finance International Ltd (Hong Kong) and Habib Finance Australia; and two joint ventures, namely, Habib Nigeria Bank (40 per cent) and Himalayan Bank Ltd (20 per cent). In addition, the bank owns 90.5 per cent shares in Habib Allied International Bank Plc, incorporated in the UK, besides two representative offices in Iran and Egypt.