Iran's Biggest Privatization Bid of the Year Set for July 31

EghtesadOnline: Iranian Privatization Organization is scheduled to stage the biggest privatization bid of the current fiscal year (March 2018-19) on July 31, IPO's deputy head, Zohreh Alipour, said.

News ID: ۷۸۳۲۸۴

18 July 2018

The organization will auction 100% of state shares in Moghan Agro-Industrial and Animal Husbandry Company, which amount to a total of 3.18 billion shares.

Alipour noted that each share will be priced at 5,534 rials with the total value reaching 17.6 trillion rials ($419.3 million), with the buyer having the option to pay the same in installments over nine years, ILNA reported.

"What makes this auction attractive for all buyers is the two-year grace period for clearing the first installment," she said, adding that the private sector and cooperatives can enjoy a 3% discount and extend the grace period to three years, Financial Tribune reported.

Moghan Agro-Industrial and Animal Husbandry Company is located in Ardebil Province's Moghan plain, where some of Iran's biggest food processing, dairy, beet and cotton production units are based. The region is also famous for its mechanized gardening and production of organic fruits.

Iranian Privatization Organization is planning to sell stakes in 631 state-owned firms by the end of the current fiscal year (March 20, 2019), which is 87% more compared to the number of firms listed for privatization last year.

Out of the total figure for this year, the ownership of 194 public entities is to be fully transferred to private owners. The remaining 437 public enterprises are to see 80% of their shares transferred.

The organization has so far sold 1.02 million rials ($24.4 million) worth of assets this fiscal.

Many of the companies in the privatization list are either underperforming or posting losses, making them a hard sell.

IPO has had difficulties in the past in pricing some of these assets, as their value and potential returns are close to zero.

Most of the assets sold so far this year were safe investments, such as fuel stations and silos, as potential buyers generally avoided other businesses that required drastic financial restructuring, debt settlement and money injection.

According to Jafar Sobhani, advisor to the head of IPO, the organization's second batch of offerings put up for sale on June 18 saw only four of the 19 companies, including silos and slaughterhouses, being sold.

The 18.84% stake in the troubled Asia Insurance Company is a case in point. It was finally sold in late April after failing to find any buyers in four offerings last year. The total sale value reached $19.8 million.

One of the more interesting assets also ended up being snatched back from the buyer. A total of 693.6 million shares in Alborz Insurance Company, constituting a 17.14% stake with a base price of 1,275 rials per share, were purchased by a consortium of pension funds and an investment company.

However, due to the consortium's public nature, with government funds and the Social Security Investment Company creating a monopoly as SSIC and the funds had a 34% stake in the insurer, the deal was nullified and Alborz went back to the government.