Karachi: The Board of Directors of Babri Cotton Mills Ltd, a Pakistani listed company, Monday approved its merger with Janana De Malucho Textile Mills (JDMT) Ltd under sections 279 to 285 of the Companies Act 2017.
The Board meeting informed in a notice on the Pakistan Stock Exchange (PSX) website: “The merger of the Company with JDMT is necessary because otherwise, it would be impossible for the Company to survive any further because of massive outstanding liabilities and huge gross, operating and net losses.”
“The outstanding current liabilities of the Company amount to Rs 1,203.320 million as of June 30, 2020. The Company has incurred a gross loss of Rs 118.061 million for the year ending on June 30, 2020 and the loss after tax was Rs 387.598 million,” said the notice.
Therefore, the only viable solution is the merger of the Company with JDMT, as it would not be possible for the Company to continue its operations alone, the notice added.
The proposed scheme of merger/amalgamation between the Company and JDMT will result in the Company being merged into JDMT, with all the assets and liabilities of the Company being transferred into JDMT, and the members of the Company being issued shares of JDMT at the ratio of 1 share of JDMT for every 1.438266 share of the Company, the notice said.
In a separate notice, Janana De Malucho Textile Mills Ltd on March 13, 2021, also approved the Proposed Scheme of Arrangement of Merger/Amalgamation of Babri Cotton Mills Ltd. (BCML) with the Company, under Sections 279 to 285 of the Companies Act, 2017.
According to the Company, the merger will be beneficial for the Company as it will lead to greater efficiency and cost synergies, i.e. by combining the business activities of both parties, performance will increase and costs will decrease, leading to greater economies of scale.
Since both companies are engaged in the business of similar goods, merging the companies will create a large opportunity to reduce costs and will enable the Company to become more competitive, the JDMT said in a notice