Why Monospool Paper merging with Pearl Paper
Bangladesh Monospool Paper Manufacturing Company, whose share price has experienced an unusual increase following its return to the main board of the Dhaka Stock Exchange (DSE) from the over-the-counter (OTC) market, is now merging with Pearl Paper and Board Mills, another entity belonging to the Magura Group.
Monospool Paper is also a part of Magura Group, whose board of directors has approved the amalgamation of the two companies. The merger will now be finalised following approval from the High Court and other regulatory authorities.
And after the merger, the two entities will operate under the name Bangladesh Monospool Paper Manufacturing Company.
According to company officials, the paid-up capital of Pearl Paper and Board Mills is at least six times greater than that of Bangladesh Monospool Paper Manufacturing Company. As a result, the revenue and profit are also higher.
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Once the two companies merge, the revenue and profit of the listed company, Monospool Paper, will increase considerably and the company officials believe that shareholders will benefit from this.
Listed on the capital market in 1989, Monospool Paper was sent to the OTC market in 2009 as it turned into a loss-making entity.
Monospool Paper was relisted on the main market in July 2021 in hopes of regeneration.
According to data from the DSE, the company's share price rose at an unusual rate after its return to the main market without a big jump in revenue and profits. At that time, each share was worth Tk55, and the price jumped manifold within a few months.
In the space of one year, in August 2022, the price of each share increased to a maximum of Tk426.
Since then, the share price has been decreasing, and the last transaction on Sunday was Tk267.
A merger follows the sale of shares
Pearl Paper and Board Mills was the sponsor company of Bangladesh Monospool Paper Manufacturing Company.
But Pearl Paper has recently sold all its shares in the company.
According to DSE data, Pearl Paper held 2,18,525 shares of the company but after selling all the shares in three rounds, Pearl Paper is being merged with Monospool Paper.
Meanwhile, despite the ban on selling shares within three years of listing, Pearl Paper has sold shares with the special permission of the Bangladesh Securities and Exchange Commission.
At that time, the commission said the company had been allowed to sell shares to repay the debt.
Why the merger?
Magura Group is looking to increase the capacity of the listed company by merging it with the non-listed one, company officials said.
At present, the listed company is relatively smaller than the non-listed one. The revenue and profit are also relatively low.
As a result, they believe that the revenue and profit of the company will increase once it is merged with the big company. Also, the cost of a non-listed company will be reduced if it is managed by merging with a listed one.
According to sources at the group, the paid-up capital of Pearl Paper and Board Mills is Tk59 crore, and the paid-up capital of Monospool Paper Manufacturing is Tk9.38 crore.
Company officials did not want to say what the share exchange rate would be if the listed company merged with the larger company.
They said the company will now apply to the High Court for its approval for a merger.
A proposal has been given to the Dhaka Stock Exchange (DSE) and the market regulator, but Niamul Islam, the company's finance director, refused to comment on the matter.
According to the company, Monospool Paper Manufacturing Company's board has approved the amalgamation scheme, which means that after the merger, Pearl Paper and Board Mills will run under Monospool Paper Manufacturing Company.
Niamul Islam said, "Pearl Paper has two units, which generate an annual revenue of Tk300 crore. Unit II has already been commissioned. After the merger of the two companies, the revenue of Monospool Paper will be at least Tk350 to Tk400 crore."
"The company being merged is much bigger than Monospool Paper. As a result, the merger will strengthen Monospool Paper's base, increasing the company's market share. This will benefit the shareholders," he added.
