Govt to Sell Entire PIA Stake

The federal government has decided to sell its entire 100 percent stake in Pakistan International Airlines (PIA), offering bidders a phased acquisition structure under which only 75 percent of shares will be auctioned initially, while the remaining 25 percent can be acquired later at a premium. Under the revised privatization plan, bidding scheduled for December 23 will be held for a 75 percent stake, as reported by the Express Tribune. The winning bidder will be given the option to purchase the remaining 25 percent within one month at a price carrying a 12 percent premium over the original bid. The premium reflects deferred payment, as the bidder will be allowed to make the payment after one year instead of upfront, officials said. The government has also revised the payment structure, deciding to take only 7.5 percent of the bid amount in cash, while the remaining 92.5 percent will be injected directly into PIA as equity rather than deposited into the national exchequer. During the previous failed privatization attempt, bidders were required to pay 15 percent of the bid amount in cash. According to the report, the decision to offload a full 100 percent stake was taken after four shortlisted bidders demanded complete operational control, with no government role in PIA’s affairs after the transaction. Prime Minister Shehbaz Sharif had earlier announced plans to sell a 60 percent stake in PIA. However, Adviser to the Prime Minister on Privatization Muhammad Ali confirmed that the government has now opted for a larger divestment to attract serious investors. “All bidders wanted at least a 75 percent shareholding for ease of decision-making, while some demanded 100 percent ownership,” Ali said. He added that the government has approved a green shoe option allowing the successful bidder to acquire the remaining 25 percent stake at a post-money valuation with a 12 percent premium. The earlier attempt to privatize PIA failed after the government offered only a 60 percent stake, attracting just one serious bidder, a real estate developer. Ali said the government’s primary objective is to revive PIA rather than maximise immediate revenue. To make the airline more attractive to investors, the government last year transferred Rs654 billion of PIA’s debt to a holding company, which is now being serviced by taxpayers. In the current fiscal year, PIA is set to receive Rs34.7 billion from the federal budget to cover debt servicing, pensions, and medical liabilities. Despite this restructuring, the new management will still need to settle around Rs. 26 billion in outstanding tax and airport-related liabilities, along with foreign obligations such as aircraft lease payments and aviation service charges. Privatisation Commission officials said PIA’s equity has since turned positive, reaching Rs. 30 billion. They added that the waiver of 18 percent sales tax on aircraft leases and the restoration of international routes have strengthened the airline’s valuation prospects. Several of Pakistan’s leading business groups are among the bidders, including the Lucky Cement Consortium, Arif Habib Consortium, Fauji Foundation-owned Fauji Fertilizer, and Air Blue.