One of the leading conglomerates of the country, Akij Group, has recently completed the acquisition of two Malaysian companies in a transaction involving US$ 77 million (about Tk 6.44 billion) that included $20 million taken from Bangladesh. This is the first cross-border acquisition by any Bangladeshi company. The acquisition deal of the BSRM Group, a Chittagong-based steelmaker, to buy a 20 per cent stake in a Kenyan steel company is yet to be completed.
The two Malaysian companies generate revenue of $16 million annually. They currently manufacture medium-density fibre board and wood floor tiles and different wood products and export to about 60 countries.
Akij Group has plans to double the production capacity of the entities within a short period of time. The two companies will now employ skilled expatriate Bangladeshis in Malaysia.
Akij Group provided $20 million from its ERQ (exporters' retention quota) account after taking special permission from Bangladesh Bank (BB) for the investment and received $24.50 million as financial assistance from the German development finance institution DEG, which is a concern of Germany's kfw, a German government-owned development bank, $13.50 million from Standard Chartered Bank Malaysia Berhad (StanChart), and $10 million from a UK-based company to acquire two operating companies - Robin Resources Malaysia SDN BHD and the subsidiary Robina Flooring SDN BHD - in Mentakab, Malaysia under its investment company Akij Resources SDN BHD. The remaining cost of the acquisition would come from the two companies' dividend income.
Green Delta Capital Limited (GDCL) was the mandated lead arranger and adviser to the transaction. It provided assistance to materialise the deal and raised $38 million from DEG and StanChart. GDCL also acted as independent valuer of the companies. The loans are term loans of 7-9 years.
Akij Group has thus become the pioneer among the local businesses in the field of cross-border acquisition. When a company based in a particular country acquires a company functioning from another country, it is called cross-border acquisition. Globalisation, in combination with other trends like increased deregulation, privatisation, and corporate restructuring, has spurred an unprecedented surge in cross-border acquisitions of late.
Under the current Foreign Exchange Regulation Act, overseas investment across-the-board is not permitted for resident Bangladeshis. The government, however, amended the 1947 foreign exchange regulations in 2015 allowing capital account transactions on a limited scale. Overseas investment applications have since been considered on a case-by-case basis. So far, Akij and BSRM have got permission to invest abroad for acquisition.
Akij Group's successful feat of cross-border acquisition is an inspiration for other big businesses of the country. It has also brought to the fore the twin issues of modernising investment policy and liberalising foreign exchange regulations. The scopes of legal transfer of money abroad and making legal investment in foreign countries should be preferred to the crimes of money laundering which are allegedly rampant under the present system.