Pakistan, on Tuesday, approved the eligibility criteria for prospective buyers to acquire majority stakes in Pakistan International Airlines (PIA), setting a net worth requirement for the buyer at a minimum of Rs30 billion or $100 million.
The Privatisation Commission’s board approved the prequalification criteria for potential bidders and also formed a prequalification committee. The board meeting was chaired by Privatisation Minister Abdul Aleem Khan.
The board convened on the same day the government invited bids for the sale of 51% to 100% stakes in PIA, with a deadline of May 3rd for the submission of Statements of Qualification by investors. The Privatisation Commission released the Expression of Interest to attract potential investors for divesting 51% to 100% shares and the draft Request for Statement of Qualification (RSOQ).
As per the financial criteria approved by the board, the bidder should have a minimum net worth of Rs30 billion or $100 million based on the latest financial accounts. In the case of a consortium bidding, the combined net worth of the consortium must be Rs30 billion, with the lead bidder having a net worth of not less than Rs8 billion or $25 million, according to the approved criteria.
This limit seems relatively low compared to the significant investment required for acquiring the national flag carrier and expanding its operations over the medium term.
According to another criterion, the bidding consortium must demonstrate that non-airline enterprises have a minimum aggregate annual revenue of Rs200 billion or $700 million. The government currently holds approximately 96% of the shares in the total issued capital of PIA.
The government aims to sell the country’s third-highest loss-making entity by June this year. According to the Pakistan Civil Aviation Act and related regulations, a foreign-owned airline cannot acquire majority stakes in Pakistani airlines. Foreign investors would need to partner with local investors to place a bid.
As part of the privatisation process, the government has also submitted a segregation scheme and the Scheme of Arrangement to clean the airline from legacy loans before privatisation. The cabinet has already approved the establishment of a new PIA Holding Company, which will become the parent body of the current Pakistan International Airlines Company (PIACL).
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