KARACHI: A group of three investors has made a public announcement of their intention to acquire more than 50 per cent shareholding along with management control in Escorts Investment Bank Ltd, which is a subsidiary of real estate developer Bahria Town Ltd.
According to a bourse filing on Friday, AKD Securities will serve as the manager to the offer collectively made by Mian Javaid Akhtar, Mian Zeeshan Javaid and Mohammad Ali Kazmi. The first two potential acquirers are engaged in trading, construction, agriculture and import-export businesses. The third potential acquirer has worked in commercial banking, insurance, treasury, trade finance, leasing and investment banking.
Although the potential acquirers are eyeing a stake of more than 50pc in the investment bank, the precise level of intended shareholding as well as the exact transaction size can’t be determined at this point.
According to the Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Regulations of 2017, potential acquirers are required to make the offer at the highest of the five possible rates, including the six-month average share price, four-week average share price and the price based on the net asset value calculated by a chartered accountant.
In addition, the acquirers must make a separate offer to acquire at least 50pc of the remaining voting shares held by the general public.
Bahria Town owns 87.9pc of Escorts Investment Bank while the general public and “others” control stakes of 10.2pc and 1.8pc, respectively.
The share price of the investment bank rose 14.29pc on Friday to Rs8 apiece. The weighted average price during the four weeks preceding the date of the public announcement of intention was Rs7.15 per share.
Bahria Town acquired Escorts Investment Bank in 2017 after the State Bank of Pakistan (SBP) refused to let the real estate developer buy a majority stake in Burj Bank for unspecified reasons. Burj Bank was a commercial bank regulated by the SBP. On the other hand, Escorts Investment Bank is a non-banking finance company or NBFC regulated by the Securities and Exchange Commission of Pakistan.
An NBFC faces regulatory restrictions when it comes to raising deposits from the general public. However, it can freely engage in financing activities, including long-term loans to individuals for home building.
Most commercial banks don’t extend home loans for Bahria Town properties given the disputed nature of their land titles. However, being a subsidiary of the real estate developer, Escorts Investment Bank was willing to extend long-term financing to home buyers in Bahria Town.
According to its annual financial accounts, the bank generated more than 27pc of its “total income” in 2020-21 via house finance activities.
The bank has been running a loss since 2016, the latest year for which earnings data is readily available. Its net loss amounted to Rs81.4 million in 2020-21.
Published in Dawn, March 12th, 2022
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