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Lets date, but not marry

The finance ministry has second thoughts about the monopolistic impact of a merger Dungsam & Penden: The pending merger between the Penden cement and Dungsam has now been shelved by the finance ministry, which concluded, following a thorough study, that it was principally incorrect. Finance secretary Lam Dorji said that, while Dungsam, which is yet to be commissioned as the countrys biggest cement plant, was a new company fully owned by the government, Penden had been in the market for the past 30 years and had several private shareholders. We found that it would be principally incorrect for a new company to merge with an old one, he said. Besides, we also want some level of competition between the two companies, so that the people are ultimately benefited. Monopoly in any market is not good. When the merger was proposed some time last year, some economists commented that the move would basically lead to market monopoly. However, former minister and chairman of Druk Holding and Investments, Om Pradhan, wants the two companies to be working in close coordination, in terms of human resources, market share and pricing, even though they are not merged. If theres no coordination, then it might lead to competition between the two companies and, since the government holds most of the shares in both the companies, it will ultimately impact government revenue, he said. We tried explaining this to the ministry, but the ministry had its own justifications. We can always think about the possibility of merging later on. The government is the largest shareholder in Penden with 40.33 percent holdings. The public and institutional investors own the rest. Pendens chief executive officer Tashi Tshering said they did not receive any formal notification from the government on its decision. The merger has both advantages and disadvantages for us, he said. As far as sharing human resources is concerned, it isnt sure how itll work out. Although we want some young people in our company, we cant afford to let our key people be taken by Dungsam. Last year, when the merger was proposed, Dungsam took three employees from Penden on deputation. The three officials were sent back after a few months. I really dont know how sharing of human resources will work out between the two companies, Tashi Tshering said. We have different levels of skills and salary scales. Dungsam managing director Dorji Norbu said that, since the merger has been called off, the three officials resigned on that ground. On Pendens limestone deposits running out, Tashi Tshering said it was true, but they have identified new areas of deposits. When the merger was proposed Penden shareholders raised concerns that their share value could be diluted. Pendens shares are among the most valued in Bhutans sluggish stock market. Today Penden produces 0.425M metric tones (MT) of cement a year, and Dungsam is expected to produce 1.36M MT a year. With the merger it was expected that the new company will produce a combined amount of 1.8M MT of cement a year or 5,730MT a day.

By Nidup Gyeltshen