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Strategic partner of DSE

BSEC approves Chinese Consortium’s bid, finally

Signing of share purchase deal on May 14

Mohammad Mufazzal | May 04, 2018 00:00:00

The securities regulator has finally approved the proposal made by a Chinese consortium for being the strategic partner of Dhaka Stock Exchange (DSE).

The approval came Thursday at a meeting held at the office of the Bangladesh Securities and Exchange Commission (BSEC) with its chairman Prof M Khairul Hossain in the chair.

Now the premier bourse-DSE-has no bar to signing a share purchase agreement with the Chinese consortium comprising Shenzhen Stock Exchange and Shanghai Stock Exchange.

Following the approval, the DSE will sign the share purchase agreement with the Chinese consortium on May 14.

The regulatory approval to the proposal of the Chinese consortium came after the DSE submitted the revised proposal on April 30. On the day, the DSE took shareholders' approval on the share purchase agreement at an extraordinary general meeting (EGM).

The Chinese consortium will become the strategic partner of the DSE by purchasing its 25 per cent or above 450.94 million shares at an offer price of Tk 21 each.

"It's a big opportunity for the DSE to be an international standard stock exchange by utilising the experiences of Shenzhen Stock Exchange and Shanghai Stock Exchange," DSE chairman Prof Dr Abul Hashem told the FE.

He said Shenzhen Stock Exchange and Shanghai Stock Exchange are among the top 10 stock exchanges in the world.

"So, it will depend on the DSE how much it can capitalise the opportunities," the DSE chairman said.

Echoed with the DSE chairman, DSE director Minhaz Mannan Emon said the agreement with Chinese stock exchanges will be a 'milestone' towards further development.

The BSEC Thursday approved the Chinese consortium's proposal, setting three conditions.

As per the regulatory condition, the DSE will have to inform the commission by completing the implementation process of agreement signing within one year.

"The conditions of agreements and relevant matters cannot be changed without prior approval of the securities regulator," the securities regulator said.

Mohammad Saifur Rahman, a BSEC executive director, said the interest of the Chinese stock exchanges in DSE shares is the reflection of continuous growth of the country.

"We hope the strategic partner will play an effective role in achieving development both in technical operation and good governance," said Mr Rahman, also the BSEC spokesperson.

The Chinese consortium earlier offered Tk 22 per share for 25 per cent of the DSE's total shares. It also offered a technical support worth nearly $37 million for free.

Another consortium, led by National Stock Exchange of India (NSE), was the second highest bidder. It offered Tk 15 per share for 25.01 per cent of the DSE's total shares.

On February 10 last, the board of directors of the DSE approved the Chinese consortium's proposal as it looked acceptable to them considering both financial and technological aspects.

On February 22, the premier bourse submitted the Chinese consortium's proposal to the securities regulator for approval.

Later, the bid-winning Chinese consortium agreed to exclude and relax some conditions set to be the strategic partner of the premier bourse following the explanation sought by an appraisal body of the BSEC.

The BSEC body sought explanation as it found some of the conditions of Chinese consortium 'contradictory' with law of the land.

Later on March 20, the securities regulator asked the DSE to submit a 'revised' proposal on fulfillment of five conditions.

The DSE then submitted the revised proposal to the BSEC on April 30, taking shareholders' approval on share purchase agreement as part of fulfilling the regulatory conditions.

On receipt of the revised proposal, the BSEC finally approved the share purchase agreement on Thursday.

The Chinese consortium offered Tk 22 for each of DSE's 25 per cent shares but finally the price stood at Tk 21 as the premier bourse disbursed dividend.

"Actually, the price is Tk 22. But it declines a little bit following the dividend offered by the DSE," a DSE shareholder said.

As a strategic partner, the Chinese consortium will also fill one vacant post in the board of the premier bourse DSE.

The Chinese consortium will be the strategic partner of the DSE as part of completing the demutualisation process.

According to a recent article by Ahsan H. Mansur, executive director at Policy Research Institute of Bangladesh, the market capitalisation of the Shenzhen-Shanghai consortium is currently about $8.0 trillion and their combined revenue in 2017 was $3.0 billion and the combined profit was $1.6 billion.

The demutualisation scheme was approved by the BSEC on September 26, 2013, in which the DSE shareholders primarily got 40 per cent of the stakes along with receiving TREC (trading rights entitlement certificate).

DSE TREC holders initially received 40 per cent shares of the exchange. Of the rest 60 per cent shares, 25 per cent have been kept in block account for strategic investors.

Besides, 35 per cent shares have been set aside for institutional and individual investors, which will be offloaded through initial public offering (IPO).

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