Sigh of relief to BIPL's minority shareholders: JS Bank to give cash as per regulations

April 26, 2023 (MLN): The board of JS Bank Limited (JSBL) on Wednesday resolved to pursue a public offer for a minimum of 24.88% ordinary shares of BankIslami Pakistan Limited (BIPL), subject to a special majority resolution by the Bank's members. The offer will be in cash which shall be computed as per the methodology prescribed in the pertinent regulations, the company's filing on PSX said. 

Earlier in March 2023, JS Group, a prominent Pakistani conglomerate, had come under fire for alleged discriminatory behavior towards minority shareholders of BIPL in a recent transaction that appears to have some anomalies. 

The transaction in question involves the sale of 21.26% of BIPL shares by Jahangir Siddiqui & Co Ltd (JSCL) to JSBL. On Feb 16th, announced it would sell BIPL shares to the latter, subject to regulatory approvals and shareholder consent. 

It mentioned that BIPL shares shall be sold against consideration of new 266,747,496 shares of JSBL (1.1318 shares of JSBL for every BIPL stock), as per a valuation carried out by an independent evaluator.

Then on March 3rd, JSBL announced plans to acquire 42.45% of BIPL shares without cash consideration or right shares. Instead, it would issue 532,629,349 new shares of JSBL to JSCL, and make a public offer for a maximum of 24.88% of BIPL equity, against consideration of up to 59.56% of JSIL shares and up to 67.90% of JSGCL’s. 

The unfair treatment raised so many brows as some BIPL shareholders might have a strict Shariah mandate as they will be paid in shares of non-Islamic companies.

The same concerns were raised by Mettis Link News earlier in March 2023, wherein we suggested the group offer cash against BIPL’s shares to the minority shareholders so they can take a smooth exit. 

On April 13, 2023, the Mutual Fund Association of Pakistan (MUFAP) asked the proactive action of the SECP towards obtaining a controlling stake in Bank Islami Pakistan Limited (BIPL), in the interest of the minority shareholders and the sanctity of the capital markets.

Masooma Zehra Majeed Chief Executive MUFAP in its letter written to Chairman SECP highlighted that the proposed transaction takes advantage of several material weaknesses of the current regulations, detrimental to the interest of minority investors and the sanctity of the capital markets.

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