Karachi: Pakistan has completed its first major privatization deal in nearly two decades with the sale of Pakistan International Airlines (PIAA) for Rs135 billion (US$480 million). The transaction, one of the largest in the country's history, was concluded with the Arif Habib Consortium (AHC) emerging as the winning bidder.

The consortium, led by Arif Habib Corporation Limited, includes Fatima Fertiliser Company Limited, AKD Group, City Schools, and Lake City Holdings Limited. The deal involves the divestment of a 75% stake in PIAA, with an option for the new investor to acquire the remaining 25% within a year at a 12% premium.

Investment in PIAA is set to receive 92.5% of the bid value, aimed at addressing the high capital expenditure requirements to revitalize the airline and expand its fleet. The remaining 7.5% will be allocated to the government or the holding company of PIAA.

In the initial bidding round, the Lucky Cement Consortium and AHC submitted offers exceeding the reference price, paving the way for a competitive second round. The final bid of Rs135 billion was 35% higher than the reserved price, securing the deal for AHC.

The government allows the consortium to include up to two additional investors, pending approval. The successful privatization of PIAA is seen as a boost to the country's privatization efforts, potentially influencing future deals, including the sale of state-owned distribution companies.

The privatization committee had set a reference price of Rs100 billion, and the successful bid exceeded market expectations, estimated between Rs80-100 billion. PIAA's significant landing rights over 78 destinations and 170 slots highlight its potential for a turnaround.

The privatization of PIAA is anticipated to positively impact the country's market dynamics and pave the way for further privatization initiatives.