What’s next for PPC and AfriSam?

07 April 2015

Now that the proposed merger between two of SA’s largest cement producers has failed to materialise, the question is: what next for PPC and AfriSam?

The deal would have created the largest cement producer in the country, and a sizeable entity in Africa with the potential to rival Nigeria’s Dangote Cement as Africa’s largest producer in the near future.

PPC has a great project pipeline and the capacity to execute the investments. AfriSam’s biggest strength is its leadership.

In chairman Phuthuma Nhleko the company has a proven entrepreneur who has valuable contacts on the African continent. Nhleko’s Pembani Group owns about 30% of AfriSam and, together with majority shareholder, the Public Investment Corp (PIC), AfriSam has solid financial backing.

The botched merger last week is a loss to investors in more ways than one. The synergies from the combined entity would have helped reduce the cost of producing cement, both in SA and elsewhere in Africa.

PPC, however, called off the merger talks. That leaves AfriSam with one of two options: walk away, or launch a hostile bid for PPC.

However, AfriSam can’t launch a hostile bid without a capital injection in the form of a rights issue from its two major shareholders.

The PIC’s Daniel Matjila says the asset manager is indifferent about the collapse of the talks. Nhleko is known to walk away from pursuing hostile takeovers.

But the PIC would be king in any move as it also owns a major stake in PPC.

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