The company: Aluminum Bahrain Case Solution
Reasons for the partial privatization of Alba:
Aluminum Bahrainis one of the leading and valuable aluminum smelter ex-China, which is known for its innovative policies and technological strength in the market. It has been consistently ranked as one of the World’s largest aluminum smelters. Through Mumtalakat, the government of Bahrain contemplated to private the 10 percent of the share capital of Alba through the Initial Public Offerings. There were a number of reasons behind the decision of partial privatization of the company, such as:
- The country sought to enable private sector-led growth through foreign and local capital investment in a number of infrastructure projects. There werea number of industries that were also in process of privatization, such as: electric power industry & public transport system.
- The decision of partial privatization was aligned to encourage the growth of the economy through private sectors and reduce the heavy investment exposure to the local Bahraini organizations.
- Another reason for the partial privatization of Alba was to reduce the financial burden on the budget of the government as well as to advance the development of the economy, the Bahrain government moved toward privatizing Alba in a way to improve the efficiency and to reduce the government consumption.
- Privatization is one of the significant attempts of any government to contribute to the balanced growth of the domestic economies.
- The proponents of privatization argue that the privately owned organizations run the business operations more efficiently and more economically, due to the reason that they are profit incentivized to eliminate the excessive spending.
- Furthermore, the privatization of the largest aluminum smelters in the world has proven to increase flexibility, increase efficiency and innovation, increase competition, create employment opportunities, and stimulate economic growth.
Options for privatization that selling shareholders’ have.
In the process of transitioning a company from public to private, the shareholders are compensated when they need to sell their shares so that the company could go private. One of the options for privatization that selling shareholders have is receiving the price per rata to their stake in the organization. It is because of the reason that the quota agreement was signed by Alba with its shareholders.
Furthermore, the process of privatization could be a nice boon to the current public shareholders since the investors of the company taking the firm private would tend to offer the premium on the price of shares relative to the market value. Moreover, the company could buy back its existing shares from the shareholders in a tender offer. A tender offer come at the premium from the current prices of share. The shareholders could reject the tender offer made by the company, which in turn prevents the firm from going private. When there would be a tender offer out on the stock of the shareholders, they might substantially gain by selling the stock. Moreover, the shareholders of the company might expect to get a 10 percent premium over the share’ market price by selling their shares to offerers………….
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