Premier Cement Mills PLC has decided to absorb two of its concerns -- National Cement Mills and Premier Power Generation -- in a bid to streamline and optimise operational efficiencies.
Having reached this decision at a board meeting on March 13, the company announced its plans for the merger through a disclosure on the Dhaka Stock Exchange (DSE) website yesterday.
Following the announcement, Premier Cement saw its share price rise 5.85 percent from the previous day to close the session at Tk 52.50 per unit.
Premier Cement will be the sole surviving entity of this merger, which involves exchanging its shares with that of the two subsidiaries, according to Company Secretary Kazi Md Shafiqur Rahman.
"It [the merger] is not just an administrative change but in reality, it will provide significant advantages in terms of improving operational efficiency," he said.
Rahman then explained that they currently file separate tax returns, maintain different licences and obtain individual environmental clearance certificates for each of the three companies.
"But after the merger, all of these processes will be consolidated into one, making operations simpler and cost-effective," he added.
Rahman also said the merger will lead to substantial cost savings and synergy between the companies by reducing administrative overheads and improving knowledge-sharing between teams, thereby enabling more seamless operations.
Another key advantage he highlighted is cost reduction in maintaining regulatory compliance.
"We must currently maintain separate tax filings, environmental clearances and licensing for each entity. But if the merger is successful, administrative burdens like these will be significantly reduced," he said.
Rahman further said that one of the most notable financial benefits of the merger will be the ability to avail VAT rebates on gas bills, which would not have been possible otherwise.
"If a company does not have its own power generation setup, it cannot claim VAT rebates on gas bills. So, once Premier Power falls under Premier Cement's umbrella, we will be able to take advantage of this rebate," Rahman added.
As a part of the merger, the existing shareholdings of National Cement and Premier Power will be restructured. At present, Premier Cement holds an 18 percent stake in National Cement while it has a 96 percent stake in Premier Power. Following the merger, these entities will cease to exist separately, and Premier Cement will assume full control.
The company also assured that public shareholders will be accommodated through the share exchange process.
However, further details will be provided after obtaining regulatory approvals.
"After March, the remaining shareholders will receive their shares accordingly," Rahman said.
With the cement and power sectors becoming increasingly competitive, he believes this merger will strengthen Premier Cement's position in the industry.
Additionally, Rahman said that Premier Cement expects to streamline its supply chain and enhance the company's profitability through the move.
Premier Power currently operates a 4.34 MW power plant, which plays a crucial role in supporting domestic cement production despite being relatively small in size.
So, by integrating power generation into the main company's structure, its management expects to enhance efficiency and optimise power costs.
Rahman informed that other than cutting costs, the merger is also expected to help Premier Cement expand its market reach.
Citing how Premier Cement frequently transports its products to different parts of the country, he said this merger will provide another benefit in helping optimise their logistic and distribution strategies.
