BSEC cancels Toyo Knitex’s takeover by Chinese firm
In separate letters sent last week to both parties involved, the commission cited a lack of progress on the takeover process and denied a request for a time extension
The Bangladesh Securities and Exchange Commission (BSEC) has cancelled its approval for the takeover of Toyo Knitex (CEPZ) Limited, formerly known as Mithun Knitting and Dyeing Limited, by Destination Express International DEX-1 Limited, a China-based courier service provider.
In separate letters sent last week to both parties involved, the commission cited a lack of progress on the takeover process and denied a request for a time extension. As a result, if the company still wishes to proceed with the takeover, it will now need to submit a fresh application for approval.
Following the expiration of the original deadline in early August, the company applied in September to the BSEC for an extension to complete the takeover. At the time of initial approval in May this year, the company's share price was Tk32.7, but it has since declined, closing at Tk10.3 on Monday.
A BSEC official, speaking on condition of anonymity, told The Business Standard the company failed to meet any of the conditions set by the regulator when the takeover was initially approved. Consequently, the BSEC decided not to consider the company's request for an extension.
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The company had cited political unrest in the country as a reason for the delay and requested an extension until 30 November to complete the process, but the BSEC declined this request.
In June this year, Destination Express International DEX-1 Limited received BSEC's approval to take over Mithun Knitting. This approval aimed to protect investor interests and resume business operations.
DEX-1 Limited is well-known for its courier services within China, particularly in the garment industry, and has a strategic partnership with a globally renowned logistics conglomerate.
As per the initial approval, 5,449,058 shares held by the late Md Mozammel Haque, through his legal heirs and others, were to be transferred to Destination Express International DEX-1 Limited according to the share purchase agreement.
The legal heirs include Rabeya Khatun, Md Rafiqul Haque, Md Mahbub-Ul-Haque, Md Atikul Haque, Md Rabiul Haque, Syeda Hasina Haque, Mahbuba Haque, Mahmuda Haque, Mahfuza Haque, and Monsura Haque.
The commission also set conditions for the takeover approval. The sponsors and directors must collectively hold a minimum of 30% of the company's paid-up capital at all times. The company is required to establish a board of directors that incorporates new shareholders holding 2% each or more of the shares.
Additionally, shares held by directors and shareholders would be locked in for an additional three years in a block module. Under securities laws, these shares cannot be used as collateral or a mortgage for any loans from financial institutions.
The share transfer settlement must be processed through a banking channel, with the buyers and sellers required to submit a compliance report to the commission within seven days of the transfer's execution. The proceeds are to execute the transfer within 30 days from the issuance of the letter.
Mithun Knitting's factory in the Chattogram Export Processing Zone (CEPZ) has been non-operational since September 2019. Its lease was terminated by the zone authorities in February 2019 due to unpaid dues of nearly Tk20 crore owed to several institutions, including the BEPZA, after failing to meet safety reforms required by the Accord. Safety compliance failure led to blacklisting by foreign buyers, who subsequently stopped placing orders at the factory.
To recover some outstanding debts, including workers' wages, BEPZA auctioned off the factory's assets.
As of 31 May 2024, Mithun Knitting's sponsor directors hold a 17.20% stake, institutional investors 15.49%, foreign investors 0.16%, and general shareholders 67.15% of the shares.
