PPC declined AfriSam’s merger proposal

PPC CEO Darryll Castle said: "Over the past few months, we applied our minds extensively to the proposed merger with AfriSam. Ultimately we decided not to proceed with the deal.

PPC said on Friday that it had declined AfriSam’s merger proposal as the two companies could not reach a consensus on the terms of a merger.

“The board has considered the proposed merger and its merits‚ and has decided not to proceed. The board has therefore terminated its engagement with AfriSam‚” PPC said.

At 12.08pm PPC shares were 1.89% firmer at R18.30. AfriSam is an unlisted company.

This comes a few weeks after PPC, a listed cement and lime producer, said it continued to consider the indicative non-binding proposal from AfriSam for a merger between the two cement producers.

PPC’s decision to halt merger shifts the focus back to whether it will take on former CEO Ketso Gordhan’s sizeable Algeria deal, and the firm’s ability to contain debt as it completes costly but important deals elsewhere in Africa.

PPC has yet to decide whether to build a 2-million-tonne-a-year plant in Algeria, a deal put on the table almost 14 months ago by Mr Gordhan, who has since made an acrimonious exit from the company.

Afrisam’s initial proposal in December was for it to dispose of its business to PPC in exchange for new PPC shares, using a merger ratio of 55%-65% in favour of PPC and 35%-45% in favour of Afrisam.

The decision to end talks comes as industry sources say at least one major multinational cement firm is actively considering a takeover of PPC, whose shares had nearly halved in the six months to March 16 following Mr Gordhan’s exit.

Germany-based HeidelbergCement, the world’s third-largest cement firm, has said it is considering investing in SA, as has French giant Lafarge, which is already a large player in SA’s inland and KwaZulu-Natal markets. A HeidelbergCement executive last week declined to comment on speculation that the firm had approached PPC.

PPC’s projects under way in Ethiopia, Rwanda, Zimbabwe and the Democratic Republic of the Congo will see its debt peaking at R10bn-R12bn in 2017, the company said this month.

While its capital structure was supportive of existing projects, the company said it would have a "constrained ability to execute further expansion projects", without mentioning the Algerian deal.

AfriSam is adding capacity to its Tanzanian operations, and says it wants to expand its footprint in Africa, particularly in central and East Africa.

PPC said on Friday it had held "extensive discussions" with AfriSam regarding its merger proposal. "The parties have not been able to reach consensus on the terms of the merger and therefore have terminated their discussions. In lieu of confidentiality agreements between the two parties, the company is unable to elaborate on the detailed reasons for this termination. The board remains committed to its strategy of enhancing the company’s position in Southern Africa and expanding its footprint into other African countries."

PPC CEO Darryll Castle said: "Over the past few months, we applied our minds extensively to the proposed merger with AfriSam. Ultimately we decided not to proceed with the deal.

"I have spent my first weeks as CEO of PPC acquainting myself fully with the company’s operations, meeting the people and reviewing its strategic direction and growth strategy.

"I have been most impressed with what I have found and am very excited about the company’s future. I have established a number of priorities for the company and am looking forward to discussing these in detail when we report our interim results on May 19," Mr Castle said.

The Public Investment Corporation, managers of the Government Employees Pension Fund, holds 12.57 percent of PPC and 66 percent of AfriSam.