Khaleej Times - 1/4/2006

The consortium involving Saudi Arabia-based Al Tuwairqi Group of Companies yesterday submitted a winning bid of $362 million for a 75 per cent stake in Pakistan Steel Mills Corporation (PSMC) at an open auction held in Islamabad.


The second consortium, which also involved key Middle East investors, made a bid of Rs16.5 per share before dropping out of the bidding. The losing consortium included Al Jomaih Holdings of Saudi Arabia, the Emirates' government of Ras Al Khaimah, Kuwait-based Noor Financial Investment Company and Ukraine-based Industrial Union of Donbass.

The bidding held under the chairmanship of newly-appointed Minister for Privatisation & Investment and Information Technology Awais Ahmed Khan Leghari while Minister for Industries, Production and Special Initiatives Jehangir Khan Tareen witnessed the proceedings.

The representatives of both the consortiums termed the bidding process as satisfactory, open and very transparent and appreciated the efforts of the Privatisation Commission for conducting the transaction in a smooth manner.

As per detail, the consortium of Saudi Arabia-based Al Tuwairqi Group of Companies, Russia's Magnitogorsk Iron & Steel Works and local firm Arif Habib Securities paid a total Rs21.6 billion ($362 million), or Rs16.8 per share, to take control of Pakistan's largest steel manufacturing plant. The successful consortium would deposit 25 per cent of the total bid offer within next 20 days and remaining amount of the total offer within 60 days after the issuance of LOA. The Privatisation Commission Secretariat issued the LOA to the successful bidder yesterday.

The Pakistan Steel plant was built by the Soviet Union, and industry officials say it will need significant investment to become more competitive. Located some 30 kilometres southeast of Karachi, Pakistan Steel Mills has an annual designed production capacity of 1.1 million tonnes. In the fiscal year 2004-05, the mills has recorded annual sales of over Rs30 billion and net profit of Rs6 billion.

Investment shares: The three partners in the consortium are expected to each pay a third of the price for the stake-holding, according to Standard and Poor's Ratings Services. S&P issued a statement saying the Russian firm MMK's "fair credit metric" were unlikely to be weakened by its participation in the bid.

"We have already a steel mill in Pakistan and with Pakistani Steel Mills, we'll be able now to fulfil our vision and enhance the Pakistan Steel Mills production to 3 million tonnes and ours to 1 million tonnes," Mohammed Tariq Barlas, vice-chairman of the Al Tuwairqi group, told reporters after the auction.

Tuwairqi Group of Companies, one of the Ieading business concerns in Saudi Arabia, on Thursday also launched a $300 million steel mills project at Bin Qasim. The group will set up Tuwairqi Steel Mills (TSM), a state-of-the-art steel-making plant in the southern port city of Pakistan.

Zaigham Adil Rizvi, a director of the Al Tuwairqi Group, said raising Pakistan Steel Mills capacity would require a total investment of around $300 million.

Assets value: Pakistan's Minister for Privatisation & Investment and Information Technology Awais Ahmed Khan Leghari said the bidding, which took place in a very transparent way, has determined the value of Pakistan Steel Mills assets to $482 million. "Out of 19,000 acres of the land of PSMC around 14,500 acres worth about $800 million has been separated from the transaction, which would be used by the government for appropriate project," he added.

"The price of successful bidder is within the range approved by the Cabinet Committee on Privatisation, and that's why we announced today the issuance of the letter of acceptance," the Minister said.

He also informed that an agreement has been reached with the employees and they were being offered a package, which he said was never given to the employees of any other entity.