Bangladesh Welding ownership transfer getting stuck again over tax difficulties

The ownership transfer of Bangladesh Welding Electrodes, which has been out of production for years, is once again going to be stuck due to mounting tax liabilities.

As a result, the prospects of revival for the listed firm, where general shareholders hold a 65.39% stake, are fading away, as the interested party, Mymensingh City Corporation Mayor Ekramul Haque, along with two of his family members, is considering a possible retreat from the deal.

The mayor family, which owns the listed Sea Pearl Beach Resort and Spa, expressed its interest in acquiring the entire stake of the sponsor-directors to bring the company back into production.

Earlier, Alif Group had shown interest in acquiring the company in July 2019, but that did not proceed due to various complexities.

According to sources, when BD Welding became non-operative in 2017, it had a tax due of around Tk17 crore.

As it failed to pay the tax, at the end of 2022, the due tax climbed up to around Tk50 crore, said the company owners.

Ekramul Haque, who secured a nod from the market regulator to acquire 43.78 lakh shares of BD Welding, on Wednesday told The Business Standard, "The commission has approved ownership transfer but the share transfer agreement has not yet been signed."

"We did not feel interested in taking it as various difficulties have arisen including non-cooperation by main entrepreneurs' successors, and NBR's tax complexity," he added.

SM Rashedul Islam, former executive director of the company and son of the main entrepreneur, told TBS, "My father had signed the MoU before he died. The shares are still in my father's beneficiary account. The interested party has not said anything yet whether they will take shares or not."

In January this year, the Bangladesh Securities and Exchange Commission (BSEC) allowed the interested party to acquire sponsor-directors' entire shares.

Also, the commission set the price for the shares of the Investment Corporation of Bangladesh (ICB) and the main entrepreneur.

More than five months have passed since then, the mayor family is yet to sign a share transfer deal with the ICB, the major shareholder of the company.

The state-owned ICB and the main entrepreneur jointly hold 31.01% shares – ICB owns 25.25% while Nurul Islam and foreign investors together hold the rest.

An official of ICB said it has made all the arrangements to execute shares transfer deal as per the BSEC direction, but the interested party did not come forward to sign the deal. Also, they did not provide any update to this end.

According to BSEC, Ekramul, his brother Aminul Islam, and Aminul's son Samiul Haque Shafa will buy the company's sponsor-directors' entire holdings.

The ICB will sell its entire holding at an agreed price of Tk17.50 per share, while the prospective buyers will pay Tk17 for each of the remaining shares held by Nurul Islam, and foreign investors.

According to the Dhaka Stock Exchange (DSE), when the BSEC approved the ownership transfer deal, its shares price was Tk25 each on 23 January. And it increased to Tk29.7 each on 26 January.

After that, the share price declined to Tk23.5 each on 26 April and again climbed to Tk29.2 on 10 May.

As per BSEC decision, the ICB will sell its entire holdings to Aminul Hoque, and his brother Ekramul Hoque for Tk17.50 each.

Aminul will buy 6,567,419 shares and Ekramul 4,378,280 shares from the ICB at Tk19.15 crore.

SM Nurul Islam, and foreign investors' shares will be transferred outside of the stock exchanges to Aminul, Ekramul, and Samiul at a negotiated price of Tk17 each.

Bangladesh Welding Electrodes Limited, which was established in 1969, was the first welding electrode manufacturing facility in then-east Pakistan.

The company was engaged in manufacturing welding electrodes, and in 1999, it entered the stock market to raise funds for setting up an oxygen plant in Chattogram.

It fell into crisis when raw material imports were disrupted because of loan defaults.