Deshbandhu Group, one of the largest conglomerates in the country, is set to merge publicly-traded Deshbandhu Polymer with its three other non-listed companies for what it says is strengthening of fundamentals.
According to a disclosure on Sunday, the merger scheme will be carried out through a capital restructuring scheme, but no other detail has been provided, for example reasons and motive behind the amalgamation or how shares will be redistributed among the existing shareholders of Deshbandhu Polymer.
The board of directors of Deshbandhu Polymer approved the merger on Thursday, subject to the approval of shareholders at the extraordinary general meeting (EGM) and the Bangladesh Securities and Exchange Commission (BSEC).
Talking to the FE, several market analysts expressed scepticism owing to the lack of information. As Deshbandhu Polymer is a publicly-listed company, investors have the right to know the possible impacts of the merger, they said.
In October this year, the company decided to do a feasibility study of the merger, but did not provide any material information while disclosing the merger decision.
"In Bangladesh, there is no successful example of merger among listed firms. In most cases, investors have lost their money. That's why transparency is needed in the process," said Al-Amin, associate professor of the Department of Accounting & Information Systems of Dhaka University.
Merger is done to gain efficiency all over the world.
It is a popular business decision worldwide; there are many purposes, such as revenue synergies, cost synergies, diversification, acquisition of assets, and an increase in financial capacity, and tax benefits, said Prof Al-Amin.
Mohammad A Hafiz, former president of the Merchant Bankers Association, said, "Merger will bring good results if sponsors are honest."
In the case of Deshbandhu Polymer, the advantage or the real impact of the merger is not clear. Non-listed firms do not have the obligation to disclose financial information. Therefore, no data of Deshbandhu Sugar Mills, Deshbandhu Food & Beverage, and Deshbandhu Packaging is publicly available.
"Companies should have provided information about the impacts of the merger in terms of revenue, profit, value creation etc," added Mr Al-Amin.
The board proposed increasing Deshbandhu Polymer's authorised capital from Tk 3 billion to Tk 11 billion.
"We believe there will be a good result after the merger," said Md. Acial Hoque, chief financial officer of Deshbandhu Polymer. He declined to give further details.
How is Deshbandhu Polymer doing?
Deshbandhu Polymer, which was listed in the stock market in 2011, manufactures polypropylene (PP) woven bags for the packaging of wheat flour, food grains, animal feeds, and fertiliser.
After the merger announcement on Sunday, the price of Deshbandhu Polymer on the Dhaka Stock Exchange (DSE) dropped 2.51 per cent to Tk 35 per share.
The company's sales revenue rose 4.6 per cent year-on-year to Tk 1.09 billion in FY23, while profit jumped almost 21 per cent to Tk 35 million.
Despite the profit growth, the company slashed cash dividend to 2.5 percent for FY23 from 5 per cent for FY22.
Firms to be merged with Deshbandhu Polymer
At present, the Deshbandhu Group has a presence in the country's food and allied industry, textile and apparel industry, real estate and building materials industry, and the service industry.
The group operates seven separate business entities in the food and allied sector, of which sugar mills, food and beverage, and packaging entities may merge with the Deshbandhu Polymer.
Deshbandhu Sugar Mills is the country's pioneering sugar mill that began its journey in 1932 and was privatized in 1999.
Deshbandhu Food & Beverage (DFB) was launched in 2014 as the latest business venture by the Deshbandhu Group to serve the ever-growing demand for quality consumer goods in Bangladesh.
The company exports products to more than 15 countries in the Europe, Africa, the Middle East and Asia, according to its website.
Deshbandhu Packaging is a producer of flexible intermediate bulk containers (FIBC), WPP bags, PE bags for fertiliser, rice, salt, sugar, and chemicals, block bottom bags, and biaxially oriented polypropylene laminated bags.
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