United Power merges two of its units

United Power Generation and Distribution Company acquired two of its power generating units at Tk 652 crore in a move to cut costs and boost profits.

The company acquired United Ashuganj Power Ltd for Tk 556.8 crore and Shajahanullah Power Generation Company for Tk 95.2 crore. The merger received the final approval from the High Court on Wednesday.

United Power's total power generation capacity will increase about 50 percent to 240MW -- and revenues are projected to rise about 25 percent.

Net profits will swell about 23 percent and the earnings-per share 22 percent, according to the amalgamation scheme. The total assets of United Power will expand by 51 percent.

The merger will result in a reduction in the cost of capital and production per unit, and ensure proper deployment of human resources leading to greater operational efficiency of the company.

As three companies are amalgamated into one, it will now have one common supervisory management.

“The amalgamation will bring in further integration in values and strategies to increase total shareholder returns,” the company said in the merger scheme.

United Power was listed on the stockmarket in 2015. Its net profit stood at Tk 246.46 crore and basic EPS Tk 8.3 at the end of 2014, up from Tk 177.44 crore and Tk 5.98 crore respectively a year earlier.

The completion of the merger put a little impact on its share prices. On the Dhaka Stock Exchange yesterday, each United Power share traded between Tk 163.1 and Tk 167.1, before closing at Tk 164.2. Sponsors hold 90 percent stakes in United Power, while institutional investors own 5.5 percent and the public 4.5 percent.

The trend of merging sister concerns 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.

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.