The Afrimat quarry in Greenbushes, Port Elizabeth Picture: DARYN WOOD
The Afrimat quarry in Greenbushes, Port Elizabeth Picture: DARYN WOOD

Shares in Afrimat have risen to a record high as investors breathed a sigh of relief following the building materials supplier’s decision not to pursue the R2.1bn takeover of Universal Coal.

Investors have grown wary of large deals, particularly as the likes of Woolworths and Famous Brands struggle to turn around the now-flagging offshore companies they bought several years ago.

After gaining 5.7% on Wednesday following the announcement, Afrimat’s shares surged as much as 8.8% on Thursday to a record high of R36.50. 

The stock gave up some of those gains in afternoon trade, with the last transaction going through at R34.71, a 3.5% increase for the day. That gives Afrimat a market capitalisation of R5bn, or nearly 60% of PPC’s current valuation of R8.4bn.

Afrimat said in April it had made an offer for Australia-listed Universal Coal, which operates in SA and counts Eskom as a client. It offered a maximum price of A$0.40 a share. 

Universal Coal, which has been courted by other suitors in the past, operates thermal coal mines including Kangala and the New Clydesdale Colliery, both in Mpumalanga.

Afrimat CEO Andries van Heerden said on Wednesday that the deal was abandoned because it would have been “significantly more expensive” if the company wanted full operational control.

Van Heerden said the due diligence process revealed that the transaction would become far more expensive than initially anticipated if Afrimat were to require full operational control.

“The return on this investment, although still good, was not as good as other opportunities available to Afrimat,” he said.

Independent analyst Anthony Clark said on Wednesday that with the deal off the table, there was no need for a rights issue by Afrimat, and this removed uncertainty.

With Siseko Njobeni

hedleyn@businesslive.co.za