PPC says Canada’s Fairfax Africa Investments has withdrawn its firm intention to make a partial offer to acquire R2bn of ordinary shares in the cement group for R5.75 per share.
SA’s largest cement maker had in late November 2017 rejected the offer by the African arm of Canadian insurer Fairfax Financial Holdings, saying it significantly undervalued PPC.
This effectively sunk a joint conditional partial offer from unlisted South African cement producer AfriSam and Fairfax Africa Investments. It was conditional on a merger between PPC and AfriSam, subject to a R4bn recapitalisation of AfriSam before any merger.
This means only European cement titan LafargeHolcim — which has cement assets in SA — is left among four potential contenders that had shown varying expressions of interest in merging with or buying some or all of PPC. These included Nigeria’s Dangote Cement and Ireland’s CRH, both of which pulled out recently.
PPC said the independent board continued to engage with LafargeHolcim “in respect of its approach”.
Momentum Securities analyst Sibonginkosi Nyanga said earlier that CRH management was quoted as stating that its strategic priority was markets in Europe and North America and that it would not “overinvest in developing economies”.
“The acquisition of PPC would have differed significantly with CRH’s declared acquisition strategy. With regards to Dangote, chances are [SA’s] Competition Commission remedial action would have outweighed the benefits of the deal.”
At least 25% of PPC’s bigger shareholders earlier rejected Fairfax’s offer. They said PPC was worth between R8 and far more than R10 per share, if a control premium was added.
PPC has 11 cement factories in SA, Botswana, the Democratic Republic of the Congo, Ethiopia, Rwanda and Zimbabwe.
A large capital expenditure programme is mostly complete, with newly commissioned operations in the rest of Africa set to contribute nearly 50%
of group profit within two or three years.
The AfriSam-Fairfax proposed merger ratio was based on a share exchange of 58 PPC shares for 42 AfriSam shares, valuing PPC at a 62% premium based on pro forma earnings multiples of the two businesses, according to AfriSam.
But PPC told Business Day last week that it was “on a fundamentally different footing both operationally and from a balance sheet and cash flow perspective” after the group chalked up attributable net profit in the six months to September, nearly tripling it to R294m from R102m in the same period in 2016.