Over the course of the last several years, Bangladesh has seen a rise in the number of mergers and acquisitions M and A agreements, both domestic and international. The favourable environment for foreign investment in Bangladesh and the growing entrepreneurialism in the nation have both contributed to an increase in the number of acquisition agreements that have been completed in the country.
In spite of the lockdowns that occurred in 2020 and 2021, a number of mergers and acquisitions M and A transactions had taken place in Bangladesh. These transactions included the acquisition of GlaxoSmithKline Bangladesh by Unilever Overseas, the purchase of majority shares in Sanofi Bangladesh by Beximco Pharmaceuticals, the acquisition of Apollo Hospitals Dhaka by Evercare for a total of $118 million, the acquisition of Julpahr Pharmaceuticals by Radiant, the acquisition of Julpahr Pharmaceuticals by Radiant, and China Huadian’s acquisition of Mymensing 50MW Solar IPP, amongst others.
Additional mergers and acquisitions M and A transactions have taken place in Bangladesh in the following industries: chemicals, retail, logistics, tobacco, cement, power, textile, telecommunications, technology, and financial businesses.
Structure of the Law of M and A
Given that Bangladesh does not have a comprehensive mergers and acquisitions act, the country’s mergers and acquisitions are governed by a combination of a variety of statutes and by-laws. The Contract Act of 1872, the Companies Act of 1994, and the Competition Act of 2012 are the key pieces of legislation that together create the fundamental legal framework that regulates mergers and acquisitions in Bangladesh.
To add insult to injury, public limited companies, including listed companies, are required to comply with the Bangladesh Securities and Exchange Commission Acts 1993, the Securities and Exchange Ordinance 1969, and the Bangladesh Securities and Exchange Commission (Substantial Acquisition of Shares and Takeovers) Rules 2018, in addition to other security laws and by-laws that are implemented by the regulators from time to time.
Some of the exhaustive industry-specific laws, by-laws, and rules that are essential to address the issues and maintain a favourable legal environment in an M and A transaction include the Bank Companies Act of 1991, the Financial Institutions Act of 1993, the Bangladesh Telecommunication Act of 2001, the Telegraph Act of 1885, the Petroleum Act of 2016, and the National Digital Commerce Policy of 2018. In addition, relevant rules and by-laws promulgated thereunder are also included in this list.
In addition, transactions that involve foreign investments and currencies are required to comply with the Foreign Exchange Rules Act 1947 (FERA), the Guidelines for Foreign Exchange Transactions (the Guidelines), and any other regulations, circulars, and guidelines that have been issued by the Bangladesh Bank, which is the central regulatory bank of the country and is also responsible for the administration of foreign exchange transactions in Bangladesh.
As well as other activities of a similar kind, transactions such as rebranding, intellectual property rights on innovations, trademark transfers, design patent transfers, and other similar activities are governed by the Trademark Act 2009, Trademark Rules 2015, Patent and Design Act 1911, and Rules of 1933.
The Most Recent Significant Events of M and A
In spite of the economic crisis that was brought on by the Covid-19 epidemic, which culminated in a considerable decrease in foreign direct investment [1], Bangladesh has seen some of the greatest mergers and acquisitions agreements in the years 2020 and 2021, as well as advancements in the laws and rules governing acquisitions and takeovers.
The local business of GlaxoSmithKline was acquired by Unilever after the company
Setfirst, a part of the GSK Group, sold Unilever an 81.98 percent stake in GlaxoSmithKline (GSK) Bangladesh Ltd. in June 2020 for a total of 20.2075 billion Bangladeshi taka. This transaction established a new record for the highest exchange value of an individual firm on the Bangladesh Stock Exchange (DSE).2 [2]
The purchase of Sanofi’s local business organization by Beximco
Beximco medicines Limited, a leading producer and exporter of medicines in Bangladesh, acquired 54.6 percent ownership in Sanofi Bangladesh Limited in October 2021 by entering into a share purchase agreement. This acquisition was made possible by the company’s ability to buy shares. The remaining 45.4% of Sanofi Bangladesh is owned by the Bangladesh government, which is represented by the Bangladesh Chemical Industry Corporation (BCIC) and the Ministry of Industry.[3]:
The buying of Apollo Hospital by Evercare International
For roughly ten billion Bangladeshi taka in foreign direct investment (FDI), Evercare and CDC Group, the development finance organization of the United Kingdom, bought a controlling position in STS Holdings Ltd., the infrastructure owner and operator firm of Apollo Hospitals in Dhaka. This business transaction took place in the first half of the year 2020. Evercare Hospital Dhaka is currently a member of the Evercare Group’s network of hospitals throughout South Asia and Africa, as a result of the purchase and rebranding of the hospital.[4]:
The purchase of Julpahr Pharmaceuticals by Radiant International
It was one of the greatest takeovers in the pharmaceutical industry when Radiant Pharmaceuticals purchased Julphar Bangladesh in January of 2021. Julphar Bangladesh is a subsidiary of the global company Julphar Gulf Pharmaceutical Industries, which is situated in the United Arab Emirates. Radiant Pharmaceuticals paid around 1.4 billion Bangladeshi taka for the acquisition.
Through the purchase of Janata Jute Mills by the Akij Group
The Akij Group of Bangladesh, which is the owner of the biggest jute yarn manufacturing plant in the world, made the purchase of Janata Jute Mills for around 7 billion Bangladeshi taka throughout the course of the Covid-19 outbreak. This transaction was the largest stealth acquisition that Bangladesh has ever made. The acquisition also included Sadat Jute Mills, a cold storage facility, and a second Janata plant in Cumilla that began operations in 1985. Both operations were included in the deal.(5) [5]
The rules that were issued by the Bangladesh Securities and Exchange Commission in 2018 regarding the substantial acquisition of shares and takeovers
A development that has been welcomed in Bangladesh’s mergers and acquisitions environment is the Bangladesh Securities and Exchange Commission (significant purchase of Shares and Takeovers) Rules, 2018, which pertain to the significant purchase of shares and takeovers among companies.
Not only should there be a mechanism, such as an application, for requesting an exception from the rules’ limits, but there should also be the ability to make large-scale acquisitions of shares in a publicly traded company through cash purchases made through the securities exchange and through negotiated arrangements, both within and outside of the trading system of the exchange.
Amendments to the National Digital Commerce Policy for the Year 2020
In the immediate aftermath of the covid-19 pandemic, the government issued the National Digital Commerce (Amended) Policy 2020, which removed the requirement of establishing a joint venture with a local company and allowed wholly foreign-owned e-commerce entities to operate in the country as long as they adhered to the country’s laws, rules, regulations and guidelines, which had previously deterred potential large conglomerates from entering the country’s digital market space.
Competition Act of Bangladesh, passed in 2012
Under Bangladesh’s Competition Act, instances of combinations include acquisition, taking control, amalgamation, and merging in commerce. Other examples include combining in commerce. A combination that generates or is likely to have a negative impact on competition in the market for goods or services is specifically prohibited by the Act. This provision is especially important for mergers since it is a vital component of the Act.
As a consequence of this, prior authorization from the relevant regulator may be necessary for combination transactions. This is the case if the relevant regulator is satisfied that the combination would not have an impact that would be detrimental to competition. In spite of the existence of a legal framework, there is still a very limited amount of enforcement of law, notably with regard to the regulation of mergers and acquisitions activities.
Possible Mergers and Acquisitions in Bangladesh: Moving Forward
Bangladesh has been a witness to some of the most major mergers and acquisitions agreements taking place in the years 2020 and 2021, despite the worldwide pandemic. Bangladesh has seen an increase in the number of mergers and acquisitions M and A agreements and transactions that have come in, in addition to an excess of foreign direct investment (FDI). Bangladesh has the potential to attract more foreign direct investment (FDI) in the region, given that countries such as Japan, Korea, the United States of America, the United Kingdom, and other EU states are contemplating moving their manufacturing operations away from China.(6) [6]
In the context of Bangladesh, mergers and acquisitions M and A might be one of the most important methods that are used to revitalize the financial industry and increase company. It is now time to make preparations to invite the mergers and acquisitions experts to come forward and start the process. A number of other non-bank financial institutions are also in precarious situations. Investors are of the opinion that the mergers and acquisitions ecosystem in the nation has the potential to play a significant role in defusing this dangerous scenario.[7]:
As a result of the conservative stance taken by the government, the absence of a legal framework for such outbound or outward investments, and the limits imposed by foreign currency rules, overseas purchases are not very prevalent in Bangladesh. A thorough examination of mergers and acquisitions (M&A) regulations with regard to both inbound and outbound transactions is an endeavor that the government need to undertake.
This is because the rules that are now applicable to M and A transactions seem to be fragmented, with some laws not being enforced and others being too restrictive for firms to thrive. The establishment of Bangladesh as a destination for investment in the area has recently been a priority for Bangladesh. In this context, it is anticipated that Bangladesh would develop a legislative framework that will assist Bangladesh in becoming the next “Asian tiger.”
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