PPC-AfriSam deal scrapped on price dispute

30 March 2015

PPC Ltd. and the AfriSam Group (Pty) Ltd. called off a merger of South Africa’s two biggest cement makers after failing to agree on price,

according to four people familiar with the matter.

That regulators might block the proposed deal due to competition concerns was also discussed during the three months of talks. The two companies would have controlled ±60% of the South African market, according to Roy Mutooni, an analyst at Renaissance Capital. PPC spokeswoman Azola Lowan declined to comment on deal’s collapse.

PPC received an offer in December to combine with AfriSam and jointly expand into new African markets. A tie-up was supported by the Public Investment Corp., the continent’s biggest money manager.

PPC Chief Executive Officer Darryll Castle, who was appointed in December said: “Ultimately we decided not to proceed with the proposed deal.”

Cement companies are expanding in Africa as governments increase investment in infrastructure to support economic growth. PPC is building new plants in the DRC, Rwanda, Zimbabwe and Ethiopia, while AfriSam has operations in Tanzania, Lesotho and Botswana.

They face competition from Paris-based Lafarge SA and HeidelbergCement AG of Germany as well as Nigeria-based Dangote Cement Plc, which plans to more than double capacity by 2016.

“With it likely to have taken two years for talks and competition approval, I think investors felt it was the wrong time for PPC,” RenCap’s Mutooni said.

PPC sales gained 9% to 9 billion rand in the year through September, while profit declined 9% to 849 million rand. Net debt increased 55% to 5.5 billion rand.

AfriSam’s website doesn’t contain financial information. A spokesman for the PIC, AfriSam’s majority owner, hasn’t responded to a request for comment.

PPC shares gained 5.7 percent, the most since Oct. 31, to 18.99 rand at the close in Johannesburg.


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