DSE board backs China in brawls over market buy

Dhaka Stock Exchange is expected to propose to the securities regulator for approving Chinese consortium's offer as it qualified in the bidding as the bourse's 'strategic partner', outbidding its challenging rivals.

In the wake of a reported tug-of-war, two DSE board members said the premier bourse sticks to its position as there is 'no scope' to go beyond the law passed by parliament.

"The law approved by parliament has no provision of selecting two strategic partners. So, we have to seek the regulatory approval in favour of the bidder which qualified in the bidding arranged to select the exchange's strategic partner," said one of them.

The premier bourse called a board meeting for February 19. At that meeting the DSE board will approve minutes of the previous board meeting that accepted the proposal from the Chinese consortium for a buy of the bourse share.

"After approving the minutes of previous board meeting, the DSE will send its proposal to the securities regulator for approval in favour of qualified bidder," the DSE board member said.

He said the demutualisation act has specified the exchange's authority in selecting its strategic partner.

"The job of the securities regulator is to look whether the strategic partner was chosen as per rules. The regulator has also the authority of accepting or rejecting any proposal," the DSE governing-body member said.

On February 10, the DSE board approved the proposal of the Chinese consortium comprising Shenzhen Stock Exchange and Shanghai Stock Exchange which qualified in the bidding for DSE's strategic partner. This consortium came out as the highest bidder.

Another consortium led by the National Stock Exchange of India (NSE) was the second-highest bidder.

Following the DSE's approval for the proposal of the Chinese consortium, the second-highest bidder and the Bangladesh Securities and Exchange Commission (BSEC) allegedly exerted pressure on the DSE to consider the NSE-led consortium as the strategic partner.

The Chinese consortium of Shenzhen Stock Exchange and Shanghai Stock Exchange had offered Tk 22 per share for 25 per cent of total DSE shares. The Chinese duo also offered technical support worth nearly $ 37 million for free, according to DSE officials.

The other consortium offered Tk 15 per share for 25.01 per cent of total DSE shares. The NSE-led consortium also wanted two posts on the exchange's board although the demutualisation law created one for a strategic partner.

Also, the NSE-led consortium was found wanting on the other deal related to technical support.

Asked, a BSEC official said the regulator has yet to receive any proposal on selection of strategic partner from the DSE.

"The regulator will deliver its decision conserving interests of the country and stock exchange," the BSEC official said.

Meanwhile, Transparency International Bangladesh (TIB) raised concern on Friday following media reports on influence by the second-highest bidder and subsequent move by the regulatory body to select the Indian bidder as strategic partner of the country's premier bourse.

In a statement, the TIB said the selection of the second-highest bidder instead of the highest one without showing any valid reason would trigger questions both at home and abroad.

As per the demutualisation scheme, the 13-member board of the bourse comprises seven independent directors, four shareholder-directors, one from strategic investors' category, and the bourse's managing director.

The demutualisation scheme was approved by BSEC on September 26, 2013, in which the DSE shareholders primarily got 40 per cent of the stakes along with receiving TREC (trading rights entitlement certificate).

Of the rest 60 per cent shares of the bourse, 25 per cent have been kept in block account for strategic investors. Besides, 35 per cent shares have been set aside for institutional and individual investors, which will be offloaded through initial public offerings (IPOs).

During the last five years, the DSE has not succeeded in getting any strategic partner although some local and foreign partners showed interest.

As a result, the BSEC repeatedly extended the deadline to find strategic investors, and the commission for the last time gave the bourse a four-month time extension that ends on March 8.

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