KARACHI, Aug 20: D.G. Khan Cement Limited is in advanced talks to acquire majority shares in Pioneer Cement Company, a source close to the deal confirmed on Wednesday.The sponsors of the D.G. Khan are understood to have entered into an agreement with the Noon Group for the acquisition of its majority holding of 52 per cent in Pioneer Cement. The sale/purchase price per share in Pioneer is being worked out.

The production capacity of D.G. Khan is at 4.2 million tons and that of Pioneer Cement 2.1 million tons. The combined capacity of the merged company would thus increase to 6.3 million tons.

Between D.G and the other giant in the sector, the Lucky Cement Company, the race -- even if quietly -- has been to be the biggest. D.G. Khan which had stood aloft as the largest player in the industry since 1990 lost its top slot to Lucky in 2005, after the latter went into huge expansions.

“The D.G.-Pioneer combined capacity at 6.3 million tons would equal to that of Lucky, giving the former the satisfaction of sharing the first place on the rostrum,” said the company source.

Cement industry comprises 27 companies, of which 21 are listed on the stock exchanges. The industry is divided into two regions, Northern and Southern Zones. The Northern region caters to almost 70 per cent of the total cement dispatches.

Both D.G and Pioneer are located in the northern zone. That would perhaps enable D.G to capture a larger share of the Indian market, but analysts thought that a buyout of a cement company in the Southern region would have provided D.G. the needed proximity to sea.

The Mansha group, which owns D.G. Khan Cement could have little to worry over the wherewithal. The group — sponsors of the MCB Bank - is sitting on a pile of cash following the recent sale of 20 per cent stake in MCB Bank to Maybank of Malaysia for $800 million.

As for the cement industry, analysts believe that, like the financial sector, sooner or latter it would all boil down to the survival of the fittest.

Of the two dozen cement plants in operation, there were numerous smaller ones with as low a capacity as 2,000 tons per day or slightly higher. When the going gets tough, the smaller companies might find it difficult to survive in a sea of competition.

“They would be forced to merge into larger units or would be ‘bought over’ by the big fish,” says an analyst who follows the cement sector.