Afrimat CEO slams slow pace of merger approvals

Afrimat CEO Andries van Heerden has decried the length of time taken to approve his company’s acquisition of Lafarge, adding his voice to those calling out the competition authorities’ lengthy vetting process.

The Competition Tribunal approved Afrimat’s $6m purchase of Lafarge SA and its subsidiaries in April 2024 — exactly a year after the deal was first announced.

In a letter to shareholders contained in the group’s annual report published on Friday, Van Heerden said the group had successfully integrated Lafarge into its operations but delays in the deal’s approval had led to challenges that could have been avoided.

“On the cement side, because the Competition Tribunal took an unusually long time to rule on the Competition Commission’s recommendations, by the time Afrimat took over the cement operations they were in significant disrepair and the cash available at the acquisition date had diminished,” Van Heerden said.

“Approximately R185m was spent in the current financial year to return the kilns to steady production. Though cement losses are steadily decreasing, this has resulted in a significant loss for this financial year,” he said.

The Lafarge acquisition included quarries, ready-mix batching plants, fly-ash operations and an integrated cement operation and grinding plant.

Afrimat is selling five quarries and four ready-mix concrete operations as part of the conditions laid out by competition authorities in giving the deal the green light.

“Through our extensive industry experience, we knew exactly what had to be done to improve these operations. The new quarries underwent almost immediate efficiency improvements, ensuring they produced measurable results by year-end while also focusing on long-term sustainability,” Van Heerden said.

“When the Competition Commission conditionally approved the transaction, the business had good cash flow; however, the delay in the Competition Tribunal’s final decision really hurt us and was completely outside of management’s control,” he said.

“Nonetheless, we focused our attention on the great aggregate assets we added to our portfolio and tackled challenges in the cement business head-on, ensuring that extensive kiln maintenance was performed optimally and will henceforth be conducted regularly.”

Remgro CEO Jannie Durand has also expressed frustration at how long SA competition authorities were taking to approve M&A deals.

One of the delayed deals Remgro is involved in is the proposed fibre merger of Vodacom and CIVH (a Remgro-owned company). The transaction, first announced in late 2021, is still in the works amid legal wrangles after the tribunal rejected it last year.

Vodacom and Remgro on Friday extended the long stop date for the deal to July as they appeal against the decision to block the deal.

In a frank assessment Van Heerden said the group’s management was caught napping in attending to “multiple challenges” facing its Nkomati Anthracite Mine.

The challenges include “extensive drive” to get the required environmental impact assessment (EIA) over the line, and adjusting the mine’s management structure.

“We are thankful to have received a much more comprehensive EIA, which expedited mining across the mining areas. Numerous houses and graves were relocated, along with an Eskom power line, as they were obstructing mining operations. Most of the mining area is now cleared,” he said.

“The market knows that this is a challenging mine. Nevertheless, as an executive team, we should have stepped in earlier to analyse the data being produced. We subsequently made some tough decisions to rectify the situation, and once we did, the results were palpable.”

khumalok@businesslive.co.za