Thread by @shapara11ii

The Great Bank Robbery!

Did you know #JSBL has avoided paying Rs. 6.3bn for control of #BIPL and got it for free?

Let me tell you how!

BIPL was historically a problem child that was plagued by bad lending (non-performing loans), high cost of deposits and insufficient capital base due to provisioning.

However, the Bank managed to turn around posting record profits and paying major dividend.

JS group has had limited direct interest in BIPL through JSCL, its subsidiary

JSBL, another bank directly owned by JS group, is presently going through a rather not so sweet period mainly due to high cost deposits. Current Accounts make up 30% of JSBL’s deposit. High Opex further is an added burden. In short, it’s a mess.

Now the JS group has had a great idea, why not route all that extra cash from #BIPL to #JSBL through dividends! This will open up various options.

But #JSBL owns none of the shares of #BIPL and taking ownership beyond 30% to acquire control will trigger Takeover Rules, which would mean making a public offer for 50% of remaining 70% shares at book value of 24, which means a Rs. 9.2bn hole. That’s all #JSBL’s fragile equity

So a plan came into action. Operation: Get the Bank for a Steal

On March 8 2022, #JSBL agreed to purchase 7.79% of Emirates NBD stake in #BIPL at around Rs 13.2 depending on approval by SBP

Now coincidently #SECP somehow was bothered by Takeover regulations all of a sudden. Which otherwise is not active, and has had issues handling simple data breaches.

On Sep 30, 2022, the regulator amended the regulations that trigger Takeover regulations. Takeover regulations were reworked to say simply “Yes a person will have to bid for remaining 50% of the shares if they exceed threshold of ownership of 30% of a company.

BUT the acquirer no longer will have to pay for these shares in CASH, but you can offer to exchange them for your subsidiary shares as well”

On Nov 11 2022, #JSBL completed purchase from Emirates NBD at Rs. 13.2

Now, here is where the fun begins.

On Nov 15 2022, #JSBL issued a notice through NEXT Capital for 51% shares in #BIPL. And with this speculation began in BIPL shares.

On Feb 17 2023, #JSBL agreed to purchase 21.26% of #BIPL shares held by its subsidiary #JSCL against 1.13 shares of #JSBL. #JSBL’s share price was around Rs4.5 then, meaning the bank was exchanging Rs.5 worth of its stock for #BIPL share which was trading at Rs.13 at that time.

that’s 160% gain straight out of the gate! Forget the minority of #JSCL they wont object.

On March 3 2023, #JSBL extended this great offer to 42.45% of BIPL shareholders. Which it is expected that some will comply since they were the controlling arm through which #BIPL was controlled.

This 42.45% will makeup of #JSCL, the Randree Family (sponsors) and Sumaya Builders (an affiliate of a broker).

If this materializes, the combined holding of #JSBL will be around 50% all purchased for free shares issued by #JSBL to its gullible counterparts.

So now since this is done, how do we tackle the minority shareholders, the minimum 25% of which we need to make a public offer at Rs. 24 which is 84% above the trading price of BIPL then. Surely, we cannot afford Rs.6.3bn!

Voila! Timely SECP amendment was a blessing.

So what was done is to offer loss making entities namely #JSIL and #JSGCL to the gullible public, hoping they will not accept it and we can just checkmark this requirement for free.

But! The value of these companies right then was only Rs.1.9bn.

So another help from the unknown came here, the amended regulations permitted the securities offered to be exchanged at “90 days average closing price” before public offer.

So it happened suddenly, the dead stocks such as #JSGCL and #JSIL came to life and posted 200% and 100% gains respectively on thin volumes in past 90 days before the offer to the public was to be made.

Wow, some great luck there is. And there you have it, that’s how you get a good Bank for free and avoid Rs. 6.3bn cost.

Now the questions for the regulators,

1) how do you allow exchange of some security that obviously has had an abnormal price run.

2) Why not ask the person willing to make an offer to just liquidate the securities at 90 day avg price if its worth that much and give cash to minority holders.

3) why the hell were these regulations amended to provide this loophole

With that our first adventure in Corporate Pakistan comes to an end

@AbdulRehman0292
@Sabbandkardo @abay_insaan_ban
@Asad_Umar
@SECPakistan
@StateBank_Pak
@brecordernews @ImranKhanPTI
@ArifAlvi
@SaleemFarrukh

@threadreaderapp unroll