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February 23, 2017

Bestway signs non-binding MoU to acquire Dewan cement plant

Business

 
February 23, 2017

KARACHI: Bestway Cement Limited said on Wednesday it has signed a non-binding memorandum of understanding (MoU) to acquire Dewan Cement Limited’s north plant.

"Bestway Cement Limited has entered into a non-binding memorandum of understanding with Dewan Cement Limited for the proposed acquisition of the north plant,” the company said in a bourse filing.

 “(The proposed acquisition) includes production facility, mining leases/ licenses and inventories, stores and spares located in Hattar.”

Bestway, after entering the MoU with Dewan, has an exclusivity period of 15 days to negotiate the terms and enter into definitive documents for the proposed deal of the assets, it said in a notice issued to Pakistan Stock Exchange.

Bestway Cement Ltd had informed the PSX in December last that it was considering acquiring the northern plant and related assets of Dewan Cement. Bestway Cement Limited is part of the Bestway Group of the United Kingdom and is one of the largest cement exporters in the region. 

Other companies like Lucky Cement, Fecto Cement, and a Chinese firm have also expressed their interest in Dewan’s north plant located in Haripur District, Khyber Pakhtunkhwa. 

Analysts said the interest of local manufacturers in Dewan Cement shows that the domestic players want to keep the local market in their hands rather than a Chinese investor control the company.

They added that domestic cement players have been operating at their optimum capacities, but a growing demand is now pushing them to expand operations to meet current as well as future demand. 

Construction sector, the biggest consumer of cement, posted an impressive growth of 13 percent in fiscal year 2015-16 compared to an average of 4 percent in past four years. 

The government expects construction-related activities to gain more momentum driven by increasing public sector development spending coupled with massive infrastructure and power projects under China-Pakistan Economic Corridor (CPEC).

Recently Power Cement Limited, an affiliate of Arif Habib Group, announced to build a Rs25 billion cement factory in Nooribad to raise its production capacity to 3.37 million tons/year, buoyed by the burgeoning demand for CPEC related infrastructure projects

Local cement sales grew 9.52 percent during the first seven months of the current fiscal year of 2016/17. Total cement dispatches also improved 7.45 percent, putting the total industry’s capacity utilisation at 85 percent in July-January.

Dewan Cement has a production capacity of around 2.88 million tons per annum, constituting 6.1 percent of the total installed capacity of 45.6 million tons of the cement industry. It has two manufacturing units including Pakland Cement and Saadi Cement. 

Bestway said the proposed transaction is “conditional upon the receipt of all relevant corporate, regulatory and creditor consents and approvals.”