PPC, AfriSam merger ‘should be thoroughly scrutinised’

12 January 2015

The proposed merger between cement producers AfriSam and PPC should be thoroughly scrutinised to determine its value for PPC shareholders, says Charl Kocks, principal of Ratings Afrika.

He says there are currently more questions than answers about the proposed merger and the role of the Public Investment Corporation (PIC) in it.

The PIC, which manages the investments of the Government Employees Pension Fund (GEPF), said in a statement after the merger announcement that it held 12.57% of PPC and 66% of AfriSam.

Kocks says the PIC should be transparent about its role on both boards; about precisely when the PPC board got knowledge of the possible merger; plus whether any commitments have been made by the current board.

Kocks also asks about a possible connection between the PIC’s “surprisingly quick positioning” in the battle with Gordhan and the proposed merger.

“It will be much more credible if a new, different board considers the AfriSam proposal,” he says. Looking from outside there is no clear strategic reason for PPC shareholders to support the merger, Kocks says.

AfriSam’s current debt position is unclear and it does not make sense for PPC to become an even bigger player in the stagnant South African market by merging with one of its biggest competitors, he says.

He urges PPC shareholders to study the proposal very carefully to ensure they do not burn their fingers on AfriSam as the PIC has.No timelines have been announced.

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