KARACHI, June 7: Union Bank Limited — a private sector listed commercial bank — proposes to take over all 10 branches of Emirates Bank in Pakistan at an ‘amalgamation price’ of $18 million.

Union Bank was understood to have entered into an agreement with Emirates Bank International PJSC (EBI), a banking company incorporated under the laws of the United Arab Emirates, for amalgamation of Pakistan branches of EBI located at Karachi (at I.I.Chundrigar Road and Clifton); Lahore (at Edgerton Road and Gulberg); Islamabad, Rawalpindi, Multan, Faisalabad, Sialkot and Peshawar.

Union Bank confirmed on Friday that the State Bank of Pakistan had given its ‘approval in principle’ on June 6. An extraordinary general meeting of shareholders in Union Bank has been called for June 29 at the bank’s registered office in Faisalabad. The meeting would be asked to approve increase in bank’s authorized capital from Rs1.5 to Rs2.5 billion and to endorse the ‘draft scheme of amalgamation’ of the Emirates Bank Pakistan branches into the Union Bank. A similar consent would be sought from the majority of members of Emirates Bank, after which the scheme would be presented to SBP for its sanction.

Union Bank expects the effective date of amalgamation of two banks to fall on June 30.

The news of proposed takeover of Pakistan branches of Emirates Bank comes just as Union Bank prepares for the upcoming privatization of United Bank Limited. Union Bank and associates is one of the three parties who have been pre-qualified to bid for 51 per cent shares and management control of UBL. The bidding is set to take place next Monday (June 10).

Union Bank did not say on Friday how it proposes to raise the purchase price of $18 million— equivalent to a billion rupees. Its attempt last year to ask shareholders for cash in right issue was greeted with a cool response; the bank receiving just Rs157 million in subscription against offer of Rs540 million, for shares in the ratio of two for three.

But at the end of December last year, the Bank held cash & cash equivalents in the sum of Rs4.60 billion including Rs1.35 billion being balance on deposit accounts with banks outside Pakistan. Total assets of the bank stood at Rs 30 billion. Deposits were Rs21 billion and advances Rs14 billion.

In the three years, 1999 through 2001, the bank has concentrated on cleaning up the balance sheet, which resulted in aggregate provisioning of Rs421 million against non-performing loans, including Rs200 million provided last year. The bank earned operating profit of Rs207 million and after-tax profit of Rs31 million in the year ended December 2001.

Union Bank has 32 branches in 17 cities and employs 858 people. It is to be seen if jobs—in either of the banks— would be axed, as a result of the merger. But the hard-nosed chairman of the bank, Shaukat Tarin is reputed for effectively applying his right-sizing model at the country’s largest bank—Habib Bank Limited— in times of its greatest financial distress.

At the last count on end-December 2001, institutional investment in the Union Bank equity was nominal and nearly 90 per cent of the interest in the bank was vested in 8,870 individuals. But of those, one individual was noted to hold 47.8 million shares, equivalent to 59 per cent of the bank’s capital. Dr. Abdullah Mohammad Abdullah Basodan, a member of the Supreme Economic Council of the Kingdom of Saudi Arabia, has been identified by the Bank as the ‘sponsor’.

He sits as a director on the eight-member board of Union Bank.