Summit merges power subsidiaries

Summit Power, the first private sector power producer, plans to merge three of its subsidiaries as part of a new business strategy of its parent company, Summit Group.

Since all the companies are operating in the same area, supervisory, accounts and auditing, and legal costs can be cut down as a result of the amalgamation, officials said.

The units to be amalgamated with Summit Power are: Summit Uttaranchal Power Company, Summit Purbanchol Power Company and Summit Narayanganj Power.

“Creating synergy value is one of the main purposes of the amalgamation. All the companies will come under one management, through which efficiency will be increased, and thus, the profits,” said Shamsuddin Haider Dalim, head of public relations and media of Summit Power.

At present, Summit Power generates 160MW, Summit Uttaranchal 44MW, Summit Purbanchol 66MW, and Summit Narayanganj 102MW.

Summit Power's board of director has approved a draft scheme of the merger, which is now awaiting approval from the High Court and other regulatory bodies, according to a posting on the Dhaka Stock Exchange website yesterday.

In line with the amalgamation plan, 1.309 ordinary shares of Summit Power will be offered for 1 existing share of Summit Purbanchol Power Company, 1.668 Summit Power for 1 Summit Uttaranchal Power Company share and 1.475 Summit Power for 1 Summit Narayanganj Power share.

The exchange rate has been fixed by the weighted average net asset value on December 31, 2015 and the average market price for six months to December 31, 2015 on the DSE for Summit Power and Summit Purbanchol Power Company, both of which are listed on the stockmarket.

Each share of Summit Power, which was listed in 2005, traded between Tk 42.4 and Tk 38.2, before closing at Tk 38.4 on the premier bourse yesterday.

Each share of Summit Purbanchol, which was listed in 2013, traded between Tk 58.4 and Tk 51.8, before closing at Tk 52.6.

The exchange rate for non-listed Summit Uttaranchal and Summit Narayanganj has been fixed by the weighted average of net asset value on December 31, 2015 and average earnings-per share in the last five years to December 31, 2015 multiplied by average market price-earnings ratio.

The trend of merging subsidiaries started in Bangladesh in 2005 when Beximco Group amalgamated two of its units -- Beximco Pharma and Beximco Infusions -- into one.

In 2006, Beximco Textiles, Beximco Denims and Beximco Knitting merged with Padma Textile Mills, which was later renamed Bextex and again merged with Beximco.

Bangladesh Online merged with Beximco in 2009. Besides, Dhaka-Shanghai Ceramics, Shinepukur Ceramics, Shinepukur Holdings and Beximco Fisheries were amalgamated with Beximco in different times.

Tripti Industries merged with Olympic Industries in 2008, Keya Detergent with Keya Soap Chemicals in 2010, and Ocean Containers with Summit Alliance Port in 2012.

In 2014, Keya Cosmetics initiated the process of merging its associated companies: Keya Knit Composite, Keya Cotton Mills and Keya Spinning Mills.

Khulna Power Company, in which Summit Power has 17.64 percent stakes, amalgamated two of its units -- Khanjahan Ali Power Company and Khulna Power Company Unit II -- in 2015.

In all cases, the companies announced that the merger would enhance their profits. But the profits of the entities declined or failed to maintain the momentum in most cases.