Submitted to:

Sir Mubeen Khalid

Submitted by:
Nabiha Zaidi
Roll no. 1

Mergers and
Acquisitions in
Pakistan

A brief account on the activity of mergers and acquisitions

taken place in Pakistan, their procedures and benefits.

Dated: 1st
February, 2013

MERGERS & ACQUISITIONS LAWS IN PAKISTAN:

While there is currently no Pakistani corporate empire that spans the globe, and
certainly no Pakistani equivalent of Tata Sons, many Pakistani companies appear to be
growing in size and are reaching the stage where they may begin to consider global
expansion, for which the mergers and acquisitions are an important step in the way.
Mergers and acquisitions in Pakistan; like any other economy, are driven by the motives
such as economy of scales, efficient corporate control, taxation shields and benefits of
synergy. The corporate environment of Pakistan has seen a number of mergers and
acquisitions, amalgamations and formation of conglomerates. Several forms of mergers
have been in practice in Pakistan. The merger activity can be proceeded by:

By an order of the Central Government;

By purchase of assets;
By purchase of shares;
By Merger through a holding company;
By acquisitions of shares;
By way of a scheme in voluntary winding up;
By exchange of shares.

Merger in the terms of corporate law is defined as:

The absorption of one company by another, latter retaining its own
name and identity and acquiring assets, liabilities, franchises, and
powers of former, and absorbed company ceasing to exist as separate
business entity. It differs from a consolidation wherein all the
corporations terminate their existence and become parties to a new one
Where acquisition is defined as:
a transaction or series of transactions whereby a person (individual,
group of individuals or company) acquires control over the assets of a
company, either directly by becoming the owner of those assets or
indirectly by obtaining control of the management of the company.
Where shares are closely held (held by a small number of persons), an
acquisition will generally be effected by agreement with the holders of
the whole of the share capital of the company being acquired. Where the
shares are held by the public generally, the acquisition may be effected
(a) by agreement between the acquirer and the controllers of the
acquired company; (b) by purchases of shares on the stock exchange; (c)
or by means of an acquisition bid.

Procedure according to companies ordinance:

Merger of Companies
Under the 1984 Ordinance, the Court plays a vital role in sanctioning mergers.
According to Section 284 read with Section 287 of the 1984 Ordinance, the scheme of
the proposed compromise or arrangement of a company (which can include a scheme of
merger) must receive the sanction of the Court.
Section 284 of the Companies Ordinance 1984 describes that a company could be
merged / amalgamated into another company if:
Three fourths of the creditors or members sanctioned the same. An application
for sanction for merger shall be given to the Court. The Court directs the
Company to convene a meeting of creditors or class of creditors or of the member
of the Company or class of members in such manner as the Court directs.

No Court sanctions a merger unless the Court is satisfied that all material facts
relating to the Company such as the latest financial position of the Company, the
latest auditors report on the accounts of the company, the pendency of any
investigation proceedings in relation to the Company and the like.

Merger / Amalgamation of Non-Banking Finance Companies

Section 282-L of the Companies Ordinance, 1984 prescribes the procedure for
amalgamation of Non Banking Finance Companies For the amalgamation of NonBanking Finance Companies (NBFCs), approval of the SECP is required under Section
282(L) of the 1984 Ordinance.

A scheme containing the terms of the merger / amalgamation has been placed in
draft before the share holders of each of the NBFC concerned separately;

The scheme shall be approved by a resolution passed by a majority in number

representing two thirds in value of shareholders of each of the said NBFCs,
present either in person or by proxy at a meeting called for the purpose;

Notice of every such meeting as is referred above shall be given to every

shareholder of each of the NBFC concerned in accordance with the relevant
articles of association, indicating the time, place and object of the meeting, and
shall also be published at least once a week for three consecutive weeks in not less
than two newspapers which circulate in the locality or localities where the
registered offices of the NBFCs concerned are situated, one of such newspapers
being in a language commonly understood in the locality or localities.

Any shareholder, who has voted against the scheme, of amalgamation at the
meeting or has given notice in writing at or prior to the meeting to the NBFC
concerned or the presiding officer of the meeting that he dissents from the
scheme of the amalgamation, shall be entitled, in the event of the scheme being
sanctioned by the Commission to claim from the NBFC concerned, in respect of
the shares held by him in that NBFC, their value as determined by the
Commission when sanctioning the scheme and such determination by the
Commission as to the value of the shares to be paid to dissenting shareholder
shall be final for all purposes.

If the scheme of amalgamation is approved by the requisite majority of

shareholders in accordance with the provisions of this section, it shall be
submitted to the Commission for sanction and shall, if sanctioned by the
Commission by an order in writing passed in this behalf be binding on the
NBFCs concerned and also on all the shareholders thereof.

Merger / Amalgamation of Banking and Finance Companies:

The procedure for the amalgamation of banking companies has been stipulated in
Section 48 of the Banking Companies Ordinance, 1962 (the 1962 Ordinance) and
approval of the State Bank of Pakistan (SBP) is required for their amalgamation. The
procedure for obtaining approval for the amalgamation of a NBFC or a banking
company (under Section 48 of the 1962 Ordinance) is similar as explained above.
Provided a scheme containing the terms of such amalgamation has been placed in draft
before the shareholders of each of the NBFCs concerned, or in the case of banking
companies, each of the banking companies, and it is approved by a resolution passed by
a majority representing two-thirds in value of the shareholders of each of the said
NBFCs or the banking companies (as the case may be). If the amalgamation is approved
by the requisite majority of shareholders, it shall be submitted to the SECP or the SBP
(in case of banking companies) for sanction and shall, if sanctioned by the SECP or the
SBP by an order in writing passed in this behalf, be binding on the NBFCs or the
banking companies concerned and also on all the shareholders of the respective
companies.
REGULATORY BODIES IN PAKISTAN:
The mergers and acquisitions are monopolistic in nature and may result in the
monopoly of certain conglomerates in an economy, resulting in the elimination of an
important constituent of a capitalistic economy, i.e competition, making it difficult for
the new ventures to survive in the economy and creating barriers for new entrants and
nascent companies. To combat with these dangers, regulatory bodies are necessary for
every economy.

Monopolies and Restrictive Trade Practices (Control and Prevention)

Ordinance (MRTPO) 1970:
Pakistan had an anti-monopoly law namely Monopolies and Restrictive Trade Practices
(Control and Prevention) Ordinance (MRTPO) 1970. The Monopoly Control Authority
(MCA) was the organization to administer this Law. In the fast changing global and
national economic environment, the MRTPO, 1970 was inadequate to address
competition issues effectively. This was because:
i) The 1970s law was out of date for a modernizing and rapidly transforming market
economy;
ii) Due to several limitations in the law, the MCA was not able to meet the expectations
of businesses and the consumers at large;
iii) The first generation reforms that liberalized the economy and encouraged the private
sector required a competition policy framework that could promote and protect
competition and innovation.
The Government of Pakistan thus launched a programme to develop Competition Policy
as a key second generation reform initiative. Towards this end, the Ministry of Finance
and the MCA worked with the World Bank and the Department for International
Development (DFID), UK. As a result of these efforts, Competition Ordinance, 2007
replaced the MRTPO. After getting approve, Competition Ordinance 2007 finally
transformed into Competition Act 2010.

Competition Act 2010

The Competition Act, 2010 considers the current economic realities as well as corrects
the deficiencies of the MRTPO related to definitional aspects, coverage, penalties, and
other procedural matters. The act entails the formation of the competition commission
and its statutory provisions. Under section 43 of the act, an appellate tribunal is also
present to answer the predicaments of the parties denied the permission of the proposed
merger or acquisition. The commission sanctions the proposed mergers following an
inquiry about the aspiring companies.
The Competition Commission of Pakistan (CCP):
The Competition Commission of Pakistan (CCP) is an independent quasi-regulatory,
quasi-judicial body that helps ensure healthy competition between companies for the
benefit of the economy. The Commission prohibits abuse of a dominant position in the
market, certain types of anti-competitive agreements, and deceptive market practices. It
also reviews mergers of undertakings that could result in a significant lessening of
5

competition. Combined with its advocacy efforts, the Commission seeks to promote
voluntary compliance and develop a competition culture in the economy.
Under the 2010 Act, clearance of a merger is required from the CCP if the transaction
meets the criteria prescribed in the 2010 Act and the 2007 Regulations. The term
merger has been defined by the 2010 Act to mean the merger, acquisition,
amalgamation, combination or joining of two or more undertakings or part thereof into
an existing undertaking or to form a new undertaking (Section 2(1)(h) of the 2010 Act).
Section 11(1) of the 2010 Act stipulates that no undertaking shall enter into a merger
which substantially lessens competition by creating or strengthening a dominant
position in the relevant market. According to Section 11(2) of the 2010 Act, inter alia,
where an undertaking intends to acquire the shares or assets of another undertaking, or
two or more undertakings intend to merge the whole or part of their business, and they
meet the pre-merger notification thresholds (provided in Regulation 4 of the 2007
Regulations), such undertaking or undertakings shall apply to the CCP for clearance of
the intended merger and, according to Section 11(3), shall submit the pre-merger
application (the application) as soon as an agreement in principle is reached or a
nonbinding letter of intent is signed by the parties. The CCP reviews the application in
two phases. In Phase I the CCP, inter alia, determines whether:
1. the intended merger falls within the definition of a merger (as defined by the
2010 Act) (Regulation 10(1) of the 2007 Regulations);
2. meets the pre-merger thresholds, as defined by Regulation 4 of the 2007
Regulations;
3. Is likely to substantially prevent or lessen competition (Regulation 6(1) of the
2007 Regulations).
If the intended merger does not give rise to any competition concerns, the CCP will
allow the concerned parties to proceed with the same (the CCP may set forth the
conditions to which the intended merger is subject to). If the intended merger gives rise
to competition concerns, the CCP will initiate Phase II of its review to determine
whether the merger substantially lessens competition by creating or strengthening a
dominant position in the relevant market (Section 11(8) of the 2010 Act). Failure to
obtain clearance of a merger from the CCP may render the concerned undertaking liable
for the imposition of a penalty under Section 38 of the 2010 Act or the CCP may pass
one or more orders under Section 31 of the 2010 Act which, inter alia, empowers the
CCP to undo or prohibit a merger.
CURRENT SCENARIO OF MERGERS AND ACQUISITIONS IN PAKISTAN:
Pakistani economy has been an even terrain for acquisitions as compared to the
mergers, even with a solid framework of ruling and regulating legislations, most of the
acquisitions span banking/financial sector, cement industry and subsidiary acquisitions.
6

The list of the mergers in Pakistan is exhaustive however, we shall only be including the
mergers, acquisitions, delisting and restructuring that has taken place in the last 5 years.
MERGERS IN BANKING SECTOR:
One reason for the recent surge in bank mergers is Basel Accord II which has been
implemented from January 2008. Pakistan is signatory to the accord. To ensure that the
banks, at all times, remain financially sound, the accord links the capital that a bank is
required to hold with its risk weighted assets (RWA). The accord requires that the
capital of a bank should be 8 percent of the banks risk weighted assets. Given the spirit
of the accord the State Bank of Pakistan (SBP) had asked commercial banks to raise
their capital gradually to the level of RS. 6.0 billion, till end of year 2009. Some of the
banks whose capital was less than the required level and who felt that raising capital
through equity injection, or reinvestment of profits will be difficult, started opting for
mergers to bring their capital to the requisite level. The most popular mergers in that
regard being, that of PICIC and NIB bank. Besides the approaches prescribed by the
Basel accord for risk-weighting the assets also has something to do with expected
further consolidation of the banking industry. Following table taken from KSE, enlists
the mergers that have taken place in Pakistan from 2006 to 2012.

Name of Company

New name of the

company / merged
with

Azam Textile
Mills Limited

Saritow Spinning
Mills Limited

Summit Bank
MyBank Limited
Limited
Atlas Bank
Summit Bank
Limited
Limited
The Royal Bank of Faysal Bank
Scotland Limited
Limited
Shaheen Cotton
Mills Limited
Askari Leasing
Limited
Al-Zamin Leasing
Corporation
Limited

Shahzad Textile
Mills Limited
Askari Bank
Limited
Invest Capital
Investment Bank
Limited

Date of
Merger
2012

Paidup Capital

Ratio

2012-02-21
2011

132.750

[1.2 : 1 ]

2011-07-06

5303.582

[ 1 : 0.8 ]

2011-01-11

5001.466

[ 1 : 0.5 ]

2011-01-03
2010

17179.814

[6:1]

2010-08-02

147.294

[ 1 : 0.3 ]

2010-03-10

517.402

[ 1 : 83.1 ]

2010-01-11

496.071

[ 1 : 2.4 ]

Al-Zamin Leasing
Modaraba
Orix Investment
Bank Limited
Automotive
Battery Company
Limited
Network Leasing
Corporation
Limited
International
Multi Leasing
Pakistan Slag
Cement Industries
Limited
Universal Leasing
Corporation
Limited
PICIC Commercial
Bank Limited
Pakistan
Industrial Credit &
Investment
Corp.Ltd (PICIC)
International
Housing Finance
Ltd.
Suzuki
Motorcycles
Pakistan Ltd.
Dewan Hattar
Cement Limited
Crescent
Standard
Investment Bank
Ltd.

Invest Capital
Investment Bank
Limited

2010-01-11
2009

308.721

[ 1 : 2.6 ]

Orix Leasing
Pakistan Limited

2009-10-28

1089.000

[ 43:1 ]

Exide Pakistan
Limited

2009-05-04

52.648

[9:1]

2009-02-17

175.000

[ 500 : 1 ]

2009-01-19
2008

54.000

[1:1]

2008-11-06

64.000

[5:1]

2008-06-06

210

[ 2.44 : 1 ]

NIB Bank Limited

2008-01-01

2734.875

[ 1 : 2.27 ]

NIB Bank Limited

2008-01-01
2007

4152.72

[ 1 : 2.27 ]

KASB Bank Limited

2007-11-22

450

[ 1 : 1.30 ]

2007-10-29

438.989

[ 21 : 1 ]

2007-10-22

2565

[ 1 : 0.75 ]

2007-07-20

1257.61

[ 0.005 : 1 ]

KASB Bank Limited

Al-Zamin Leasing
Modaraba

Zeal Pak Cement

Factory Limited
Al-Zamin Leasing
Corporation
Limited

Pak Suzuki Motor

Company Ltd.
Dewan Cement
Limited
Innovative
Housing Finance
Limited

Guardian
Modaraba
Jahangir Siddiqui
Inv. Bank Ltd.
Modaraba A1Tijarah
Second Tri Star
Modaraba
WORLDCALL
Multimedia Ltd.
WORLDCALL
Broadband Ltd.
WORLDCALL
Communication
Ltd.
Union Bank
Limited
Colony Textile
Mills Limited
First Allied Bank
Modaraba
Atlas Investment
Bank Limited
ABAMCO Growth
Fund
ABAMCO Stock
Market Fund
ABAMCO Capital
Fund

B. R. R.
International
Modaraba

2007-05-25
2006

244.695

[ 1 : 1.22 ]

2006-12-30

853.125

2006-11-07

75.778

[ 1 : 3.24 ]
Certificate [ 91 : 2
]

2006-10-04

128.7

[ 1.817 : 1 ]

2006-09-06

530

[ 1 : 1.27 ]

2006-09-06

1500

[ 1 : 1.09 ]

2006-09-06

1831.702

[ 1 : 1.42 ]

2006-08-29

3387.505

[ 1 : 2.50 ]

2006-08-28

250

[ 1 : 9.50 ]

2006-08-25

350

[ 1 : 024 ]

Atlas Bank Limited

2006-07-26

506.024

[ 1 : 3.14 ]

UTP Growth Fund

2006-06-06

275.625

[ 1.845001 : 1 ]

UTP Growth Fund

2006-06-06

875

[ 0.970229 : 1 ]

UTP Growth Fund

2006-06-06

2029.42

[ 0.898072 : 1 ]

JS Bank Limited
Modaraba A1Mali
First Tri Star
Modaraba
WORLDCALL
Telecom Ltd.
WORLDCALL
Telecom Ltd.
WORLDCALL
Telecom Ltd.
Standard
Chartered Bank
Ltd.
Colony Mills
Limited
Allied Bank
Limited

ACQUISITIONS:
The list of acquisitions, as published by competition commission of Pakistan reports 261
acquisitions, (including subsidiary and associate acquisitions) since 2007. The biggest
wave of acquisitions was witnessed in 2008, the beneficiaries of which, were the
conglomerates and financial institutions. (competition commission of pakistan).

Companies/shares acquired by different conglomerates:

Nishat Group:

Mian Muhammad Mansha Yaha is the captain of this splendid ship having around 30
companies on board. Mansha, who owns the Muslim Commercial Bank as well, is now
setting up a billion rupee ($ 17 m) paper sack project too. Nishat Group comprises of
textiles, cement, leasing, insurance and management companies. Following is a brief
account of acquisitions made by nishat group

Brief of Transaction
Acquisition of 4.55 million shares of M/s. MCB Bank Limited by Nishat Mills Limited.
Acquisition of 100% stake and management control in AES Pak Gen (Pvt) Company
by a consortium comprising of Nishat Mills Limited, Adamjee Insurance Company
Limited, Security General Insurance Company Limited, Mr. Hassan Mansha,
Stanhope Investments and Eengen (Pvt) Limited.
Acquisition of 90% stake and management control in AES Lal Pir (Pvt) Limited by a
consortium comprising of Nishat Mills Limited, Adamjee Insurance Company
Limited, Security General Insurance Company Limited, Mr. Hassan Mansha,
Stanhope Investments and Eengen (Pvt) Limited.
Merger of MCB Asset Management Company Limited and Arif Habib Investments
Limited.

Date of NOC
16-06-2009
31-12-2009

31-12-2009

11/2/2011

Shirazi group:
Is another conglomerate that has been active in acquisitions. Atlas group is its
subsidiary, which has diversified a great deal over the last 10 years,

Brief of Transaction
Acquisition of shares of Shirazi Group Companies by M/s. Shirazi Capital (Pvt)
Limited.
Acquisition of 24.90% shares of Atlas Bank Limited by Shirazi Capital (Pvt)
Limited.
Acquisition of 2,916,900 (12%) shares of Total Atlas Lubricants Pakistan (Pvt) Limited
by Total Holding Asie, S.A from Shirazi Investments (Pvt) Limited.
Acquisition of 549,600 (5.46%) shares of M/s. Atlas Battery Limited by M/s. Shirazi
Capital (Private) Limited.
Acquisition of 4,370,675 shares (9.87% shareholding) of Atlas Insurance Limited by
Shirazi (Pvt) Limited.

10

Date of NOC
28-03-2008
21-01-2010
28-01-2011
13-10-2011
24-07-2012

INFLUENCE OF HOLDING COMPANIES:

A large number of local and foreign holding companies are also operating in Pakistan,
who buy the outstanding shares of various companies. Holding companies allow the
reduction of risk for the owners and can allow the ownership and control of a number of
different companies, still the same acquisition laws apply to the holding acquisitions,
and therefore they are worth mentioning. Following is the compilation of acquisitions
carried out by holding companies in Pakistan.

Brief of Transaction
Acquisition of 18.32% shares of M/s. United Bank Limited jointly by Bestway
(Holdings) Limited and Mr. Zameer Mohammad Choudrey on conversion of 14.09
million Global Depository Receipts of United Bank Limited.
Aquisition of 24.95% shares of Pioneer Cement Limited by Vision Holdings Middle
East Limited.
Acquisition of IMS Health Incorporated, USA by Healthcare Technology Holdings,
Inc. USA.
Acquisition of 21,636,783 shares of UBL Insurers Limited by M/s. Bestway (Holdings)
Limited.
Acquisition of 20.003% of the issued share capital of United Bank Limited by
Bestway (Holdings) Limited, UK.
Acquisition of 21,436,823 shares of M/s. Macter International (Private) Limited by
M/s. Pharmalux Holdings Limited.
Acquisition of M/s. GFive Holdings Corporation by M/s. Patsytems (NA) LCC.
Acquisition of 17,647,059 (22.06%) shares of M/s. Daewoo Pakistan Express Bus
Service Limited by M/s. Greentown Holdings Korea Inc.
Acquisition of 47,058,824 (58.82%) shares of M/s. Daewoo Pakistan Express Bus
Service Limited by M/s. Pakistan G.T. Holdings Company (Private) Limited.
Acquisition of 1,806,759 shares (20 to 25% of the total shareholding) of ACR Capital
Holdings PTE Limited by Marvel Project Holding BV.
Acquisition of 57,773,885 shares representing 25.43% shares of Pioneer Cement
Limited by Vision Holdings Middle East Limited.
Indirect acquisition by IMDB Energy SDN BHD, Malaysia of 23.2% shareholding in
Fauji Kabirwala Power Company Limited through the acquisition of the entire issued
and paid up share capital of Tanjong Energy Holdings Sdn Bhd, Malaysia.

11

Date of NOC
7/5/2009

8/6/2009
14-01-2010
15-11-2010
17-01-2011
23-02-2011
3/8/2011
25-08-2011
3/10/2011
25-04-2012
3/7/2012
7/9/2012

Benefits of mergers in Pakistan:

M&A result in following tax benefits:

The Income Tax Ordinance, 2001 allows amalgamating companies to set off their
business losses against the profits of the other company, provided that the
amalgamating companies continue their operations for at least five years from the
date of amalgamation. Any unabsorbed depreciation of the amalgamating
companies is also treated as an allowable expense of the merged entity

Similarly, group companies have the option to be taxed as one unit. The group
companies can also surrender their assessed losses for the year (except the capital
loss), which may be claimed by a company in the group for set off against its income
in the tax year and the next two tax years

The finance bill 2008 has also proposed to allow banking companies, nonbanking
financial companies, modarabas and insurance companies to adjust accumulated
losses against the income of the group during a tax year. Any un-used loss will also
be allowed to be carried forward for six tax years following the tax year in which the
loss arises

Transfer pricing means the pricing of transactions between two or more related
parties or between two or more segments of a company. In Pakistan, income tax
authorities can apportion / allocate income and expenses relating to transactions
between group companies in such a manner which truly reflects the essence of the
transaction.

Besides the tax saving benefits, the merged companies and the acquirers are looking
towards the regulatory benefits and capturing the market share eg. The merger of
RBS and faysal bank, and that of atlas bank and summit bank,

The divestitures of government held companies attract the interest of foreign

companies who are interested in buying the assets of the public sector companies.

LIQUIDATION, DIVESTITURES AND PRIVATIZATION IN PAKISTAN:

A large number of public sector units have already been divested and a number of other
public enterprises including telecommunications and thermal power stations have been
placed on the privatization list. partial divestiture of the Telecommunications
Corporation of Pakistan (TCP). At present, as many as 46 industrial units, including all
the remaining manufacturing units with the exception of Pakistan Steel, have been
placed on the privatization list. Furthermore, two banks and six non-bank financial
12

institutions; four units in the oil and gas sector; Karachi Electric Supply Corporation; six
thermal power units and three area electricity boards of WAPDA; Pakistan
Telecommunications; Pakistan Shipping Corporation and National Tanker Corporation;
and Pakistan Railways are also on the privatization list.
During 1991-92, 69 manufacturing units and two commercial banks were successfully
privatized. So far 91 industrial units, majority shares of two major banks and three nonbank financial institutions (NBFIs), 10 per cent shares of Pakistan International
Airlines, 12 per cent shares of Pakistan Telecommunication and 26 per cent of Kot Addu
power station have been divested. All in all 106 units have been divested, and so far
government has received Rs. 59.6 billion through the sale of these enterprises. Total
employment in the manufacturing units, which were privatized by sale of assets and
where the management was transferred, was around 35,000, out of which 63.3 per cent
opted for golden handshake scheme. If the retrenched workers are also taken into
consideration, employment in privatized units may have gone down by at least threefifth.
Modes of public sector divestitures in Pakistan
Public enterprises may be liquidated or divested partially or completely, and the
divestiture may take different forms including flotation of shares in the stock exchange
market, sales through financial institutions and equity tap and outright auction.
Sale of Assets: The divestiture of public enterprises may be pursued through
following four methods.
(a) Flotation of Shares: The shares of public enterprises are floated in the Stock
Exchange Market, and government progressively reduces its share holding in such
enterprises. Such flotation has three distinct features. First, induction of private capital
may result in higher levels of productivity. Second, government retains sufficient control
if the firm is of strategic importance. Third, gradual divestiture would not have an
adverse impact on the prices of the shares. A limited number of shares of Pakistan
International Airlines (PIA) and Pakistan Telecommunications have been offered for
sale. PIA divested 10 per cent of the shares through the stock exchange, and Pakistan
Telecommunications divested 12 per cent of its shares
(b) Auction: Auction may be done through sealed bidding or open bidding. Similarly,
bidding may be done for a part of the shares or for the entire company.
Privatization: By-passing the Sale of Divestiture: (private sector to be involved
in operations) Leasing, franchising, liquidation and other possible modes of
privatization have been used only sparingly. A couple of railway sectors were offered to
the private sector for operation but with not much success. Similarly there was a
13

proposal to let private sector run the goods trains against the payment of track charges,
but the experience has not been very successful. An exercise for unbundling of both
WAPDA and railways was carried out but so far not much has resulted from such
exercise.
Divestiture in Banking sector:
Pakistan has already divested two relatively smaller banks and is in the process to divest
two major banks. A large number of Pakistani and foreign banks are operating
simultaneously in Pakistan, and they compete vigorously with each other. It is therefore
expected that performance of the privatized banks would be better.
Two privatized banks are Allied Bank Ltd. (ABL) and Muslim Commercial Bank (MCB).
Former was taken over by a management group and a private investor (mian mansha)
has acquired the latter. The performance of the Muslim Commercial bank in the post
privatization period has been somewhat better than that of the Allied Bank. Paid-up
capital of ABL increased from Rs 272 million in 1991 to Rs 1063 million by 1997 and of
MCB from Rs 576 million in 1991 to Rs 1820 million in 1997. Similarly deposits of ABL
increased from Rs 25 billion to Rs 63 billion and of MCB from Rs 350 billion to Rs 1024
billion over the same period.
Divestiture in Power and telecommunications sector
Only 26 per cent shares of one thermal unit have been divested and the management
has been transferred to the private sector. There may have been an improvement in
productivity but the increase in profits has been due to higher prices, which were also
guaranteed.
On 12 April 2006, the government of Pakistan, which owned 88 per cent of PTCL, sold
off a 26 per cent stake to Etisalat International Pakistan LLC, a subsidiary of Etisalat, for
USD 2.59 billion. It took almost a decade from the government's initial announcement
to divest its shares in the company. On 10 September 2007, Etisalat announced plans to
acquire an additional stake in PTCL increasing its existing stake to 51 per cent. The
divestiture resulted in laying off of thousands of employees. But still, the Privatization of
PTCL, stands as one of the success stories of the smooth transfer of charge and helping
public units to turn into effective market players. It is true that the privatization of PTCL
has been effectively carried out but the privatization of railways has been completely
ruled out given the inherent difficulties in the system. However, the government shows
its unflinching resolve to continue with its determination to privatize other national
assets. The Privatization Commission is subjecting various nationalized entities to a
careful study for this purpose.

14

CONCLUSION:
Following the merger wave from 2006 to 2008, the Pakistani banking industry
transformed from a government dominated sector to a highly competitive and profitable
industry. Becoming the largest taxpaying sector, however it is a crude reality that
mergers in Pakistan either result from regulatory rulings or to create monopoly in a
sector. E.g the energy and cement sector where smaller cement companies can scarcely
avoid being swallowed up by the big fish. That eventually would empower the bigger
ones, Lucky, D.G., Maple Leaf and a few others to set the direction for the industry.
The mergers in telecom industry have proven very successful and have helped shaping
the industry as among the largest telecom industries in the world. What needs attention
is the formation of strong conglomerates, on one hand they can retain the influence over
the subcontinents economy but on the other, they may prove to be lethal for nascent
firms and budding companies.

15

REFERENCES:
http://en.wikipedia.org/wiki/List_of_companies_of_Pakistan
http://www.findpk.com/yp/Biz_Guide/html/40%20Richest%20Pakistani.h
tm
http://archives.dawn.com/archives/17434
http://www.cc.gov.pk/index.php?option=com_content&view=article&id=71
&Itemid=132
http://www.cc.gov.pk/index.php?option=com_content&view=article&id=1
55&Itemid=121
Papers:

Do bank mergers lead to efficiency gains? The Case Study of bank mergers in
Pakistan (working paper)
Thesis on privatization by prof najeeb A khan
Banking: Interest spread, inelastic deposit supply and Mergers by Musleh-ud Din
(Chief of Research Pakistan Institute of Development Economics Islamabad)

Documents:

16

Competition act 2010