After JS withdraws its bid, AKD wins battle to buy BIPL Securities

For a while, the situation had seemed set. Starting in February 2020, JS Global Capital, the brokerage firm majority-owned by veteran investment banker Jahangir Siddiqui, announced its public intention to acquire BIPL Securities, the equity brokerage arm of BankIslami Pakistan Ltd (BIPL). It was an announcement repeated to the Pakistan Stock Exchange (PSX) on August 25, for the acquisition of 77.1% of BIPL’s shares (the portion not owned by the company’s parent bank) by JS Global Capital. 

And that was that. While neither BIPL nor JS disclosed the sale price at the time, the share price of BIPL Securities after the announcement jumped to Rs9.07 per share, which would price the transaction at close to Rs700 million, were it to go through.

Except it never did go through. On November 18, JS global Capital notified the PSX that it was not proceeding with the acquisition, citing the result of the due diligence. A public announcement of withdrawal was formally made.

That would have been the end of the story (after all, BIPL has several offers on hand), except just two days later, on November 20, BIPL said it had approved the final bid of JS’ arch rival, AKD Securities Limited. Under the agreement, AKD would buy all of 77.1% of BIPL’s shares, at Rs8.6 per share, pricing the transaction at roughly Rs663 million.

It is always interesting when AKD and JS go into battle. How much of this is a purely business-based competition, how much of it is based on personal animosity, and how much of this narrative has been constructed by the media (and WhatsApp groups, thank you very much) is all up for debate. 

The mild feud can be traced to the year 2008, and to one person: Aqeel Karim Dhedhi, the highly influential investment banker and stockbroker known throughout the market by his initials AKD, which is also the name of his firm. In the ensuing financial crash of that year, AKD saw his fortunes nearly wiped out. So the story goes, he went around blaming other players for decisions that caused the crash – including JS.

For their part, JS was not amused. So began the long standing tension – at one point, according to sources, the SECP even asked third parties to step in and patch things up between the two. But by that point, the relationship between the two parties had soured irrevocably. 

But focusing on this feud alone ignores BIPL, which itself has a longer, and perhaps even more interesting back history. BIPL Securities started its life in 1952 as KASB Securities, named after the initials of its founder, Khadim Ali Shah Bukhari, the investment banker and broker whose son, Nasir, was one of Jahangir Siddiqui’s closest friends in Pakistan’s capital markets industry.

Back then, the idea of corporate brokerage houses was practically nonexistent, and so Bukhari operated effectively as an individual, offering stock trading to clients – both individual and institutional.

At its peak in the 1990s and 2000s, KASB was one of the biggest names in Pakistan’s equity markets, and maintained a research partnership with Merrill Lynch, then the third largest investment bank in the world.

It was also among the very first brokerage firms in Pakistan to embrace the internet, allowing retail clients to trade, first through their website and desktop software, and then through mobile apps. That retail, individual investor-friendly business model made KASB the largest retail brokerage in the country, and the largest of any kind by trading volume. At its peak, shortly before its sale to BIPL in 2014, the company boasted 22,000 clients and a 15% share of all trading on the Pakistan Stock Exchange.

The company also had a culture that attracted high quality talent. KASB alumni include Naz Khan, former CFO of Engro Corporation, who was the first money market trader in Pakistan and began her career at KASB in 1992. Farrukh Sabzwari (chairman of the Securities & Exchanges Commission of Pakistan), (Muneer Kamal, chairman of National Bank of Pakistan and the Pakistan Stock Exchange), Ali Sultan (treasurer at Bank Alfalah), and Imtiaz Gadar, rated best analyst in Pakistan by AsiaMoney and the CFA Society for five years and currently serving as head of capital markets at Bank Alfalah, all started their career at KASB. 

The current BIPL still has a relatively strong retail base. Combine that with improving volumes, minimum brokerage and improving stock market outlook, it is no surprise that several have expressed an interest in BIPL Securities.

But observers were quite confused as to why AKD had decided to show an interest in BIPL. After all, the brokerage house already has its own well defined online retail business: AKD Trade, a division of AKD Securities which was launched in 2002. Is AKD paying Rs663 million just so it can buy BIPL and expand its business, rather than organically growing?

The move seems a little off, which is now why rumours have spread that perhaps AKD Securities is buying BIPL on behalf of the original owners of KASB: yes, the Khadim Ali Shah Bukhari family. It seems a stretch – but as always when it comes to anything to do with AKD (or JS), rumours and conjectures are a part of the package.