Dewan Cement looks at North Plant sell off

Dewan Cement proposes to sell off its North Plant to Bestway Cement on negotiable terms

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Bestway Cement has entered into a non-binding memorandum of understanding (MOU) with Dewan Cement Limited (seller) for the proposed acquisition of North Plant of the seller which includes Land, facility and related assets, Mining Leases Licenses and Inventories, stores and spares located in Hattar, District Haripur , Khyber Pakhtunkhwa. This was notified through a notice sent to the Pakistan Stock Exchange (PSX) today.

According to the terms and conditions of the proposed transaction, the buyer has a sole and exclusive right to negotiate the terms of the transaction with the seller within a prescribed period of 15 calendar days or a mutually agreed date between the concerned parties.

The proposed transaction is conditional upon the requisite corporate, regulatory and credit approvals.

Dewan Cement Ltd. (DCL) is an ISO 9001:2008 certified company, engaged in the manufacturing and sale of cement. The company has two production facilities at Deh Dhando, Dhabeji Karachi, Sindh and Kamilpur Hattar Industrial Estate, district Khyber Pakhtunkhwa.

Bestway Cement Limited is part of the Bestway Group of the United Kingdom. Bestway Group was founded by Sir Mohammed Anwar Pervez nearly thirty-three years ago.The Group has a well-diversified portfolio incorporating within its folds cement manufacturing, global banking, wholesale cash & carry business, a string of retail outlets, real estate investment, ethnic food and beverage import and distribution and milling of rice. Recently the group has embarked upon a large power generation project in Pakistan thus further diversifying its operations and revenue base.

In terms of production, Bestway has the highest capacity (7.9million tons).Bestway has managed to take a sizeable market share and build market value  due to its effective marketing strategy. However,  the company remains significantly disadvantaged in terms of its high costs of production due to the location of its plant in the North. The company’s  competitor – Lucky Cement enjoys significant cost savings due to the location if its plant in the South.

 The company has strong prospects but becoming the market leader requires more effort. Indeed, this might be the reason why  Bestway is looking to acquire the Northern plant and related assets of Dewan Cement. Its competitors – Lucky, Fecto and Kohat have all expressed the intention to buy out Dewan earlier. Dewan has two plants in Hattar and Dhabeji with capacities 1 million tons and 1.7 million tons respectively. If Bestway is able to negotiate its terms with Dewan Cement,  it will add an additional 1 million tons to its existing capacity.However, the company needs further cost savings to achieve high standards set forth by its competitor Lucky.

The stock for Bestway is currently trading at Rs 318.48 witnessing a positive change of Rs 15.15 (4.76%).