Massive irregularities, unfair treatment in bid for BIPL controlling stake

March 21, 2023 (MLN): Minority shareholders of BankIslami Pakistan Limited (BIPL) have raised concerns about massive irregularities and unfair treatment in the recent bid to acquire a controlling stake in BIPL by JS Bank Limited (JSBL).

As per information available on the Pakistan Stock Exchange (PSX) Portal, JSBL has proposed to offer a maximum of 67.9% of JS Global Capital Limited (JSGCL) and 59.56% of JS Investments Limited (JSIL) shares in consideration for a minimum of 24.88% shares to the minority shareholders of BIPL through Public Offer.

However, minority shareholders have accused JSBL of manipulating share prices in JSGCL and JSIL to deprive them of fair and equitable consideration.

They claim that JSBL artificially managed the share prices of JSGCL from Rs70 per share to Rs330-340 per share and the share prices of JSIL from Rs10 per share to Rs19 per share from mid-November 2022 to the end of February 2023.

In a letter written to the PSX Chairman, Muhammad Abid Ganatra, Executive Director Lucky Core Industries, a shareholder of BIPL on behalf of minority shareholders highlighted that JSBL did this to take advantage of higher average closing prices of 90 days to fulfill the requirement of the newly amended law and deprive minority shareholders of BIPL of fair and equitable consideration.

The minority shareholders have also pointed out that the weighted average share prices on the stock exchange for 90 days should not be taken into consideration for fixing the minimum offer prices for minority shareholders if the shares of the target company are not frequently traded.

They claim that the share prices of JSGCL and JSIL were artificially appreciated on the back of illiquidity and that PSX must ensure to include payment of consideration in the form of cash in the Public Offer to avoid unfair and inequitable consideration to minority shareholders of BIPL.

In addition, minority shareholders have accused JSBL of discriminatory treatment in the exchange of shares between majority shareholders and minority shareholders through a Public Tender. While majority shareholders are offered shares of JSBL in exchange for BIPL shares, minority shareholders are being offered shares of JSGCL and JSIL in exchange for the same.

Minority shareholders have also written to the Chairman of the Securities and Exchange Commission of Pakistan (SECP) and the CEO of PSX to investigate these irregularities and ensure that minority shareholders are not deprived of a fair and equitable consideration.

It is obvious that none of the minority shareholders will exercise their right to opt for the exchange of these loss-making and lower-value shares being offered to them.

Apparently, the intention of the acquirer is very clear no minority shareholder of BIPL exercises its right and participates in the Public Offer and they take over the controlling stake by simply depriving minority shareholders and manipulating the spirit of law through financial jugglery, price manipulation, and discrimination.

"As you can see, the proposed acquisition of the controlling Stake in BIPL entails several irregularities and unfair treatments against the interest of minority shareholders," the letter read.

The main purpose of Substantial Acquisition Law is to protect the interest of minority shareholders and provide them with fair and equitable consideration through the mandatory Public Offer, it added. 

If these irregularities are not addressed, then the whole exercise of mandatory public offering will become redundant, and the purpose of the Substantial Acquisition Law will be defeated, it warned. 

If this transaction goes through without addressing these irregularities and fair consideration of cash is not included in the offer then it will set a bad precedent for all the upcoming acquisitions, it noted.

"Moreover, if the Front End Regulator also closes its eyes to these obvious irregularities then the trust of the public in the capital markets of Pakistan will be impacted significantly and it will also encourage others to exploit the interest of minority shareholders," it underlined. 

Earlier Mettis Link News also highlighted this discriminatory behavior towards minority shareholders of BIPL.

The PSX has yet to respond to these accusations.

Copyright Mettis Link News