FIRST Pacific Co says talks on merging its Dutch subsidiary, Hagemeyer, and trading company Koninklijke Borsumij Wehry are proceeding satisfactorily. First Pacific said yesterday the due diligence process had started and further announcements would be made towards the end of August. Under the merger plan, announced earlier this month, Hagemeyer would combine with Borsumij to become one of the world's five largest trading firms with sales of about eight billion guilders (about HK$40 billion). The basis for the negotiations is a share exchange of 4.5 shares of Borsumij for one Hagemeyer share. The exchange ratio is a reflection of the relative share values of the two companies on the Amsterdam Stock Exchange on March 31 this year and values in the past five years. Included in the negotiation is the consideration to give Borsumij shareholders one share of Stokvis Union for every 13.5 Borsumij shares. This would make the Stokvis, a Borsumij operating unit involved in the trading of industrial products, 45 per cent owned by Borsumij shareholders and 55 per cent held by the merged entity. The combination will more than double the capital base of Hagemeyer. Its earnings will also be enhanced. The two companies distribute and sell automotive and electrotechnical materials and consumer and professional brand-name products, including Panasonic, JVC and Minolta. First Pacific owns 51 per cent of Hagemeyer. Its stake will be reduced to 37 per cent should the merger plan go through. It seeks to maintain its present majority voting position in the combined entity. It also seeks to preserve Hagemeyer's present board of management for its management.