AfriSam in talks with equity partner for PPC merger bid, say sources

AfriSam is in negotiations with an equity partner to enable SA’s second-biggest cement maker to push through a merger with larger rival PPC, say two people familiar with the matter.

Closely held AfriSam has a letter of intent from an investment company based in the Americas that is willing to put up new funding, said the people, who asked not to be named as the talks are private. The deal could be concluded within the next 12 weeks, they said.

The people declined to name the potential investor as an agreement may not be reached.

The prospect of a partner with more financial strength could enable AfriSam to put forward a new merger proposal to PPC that would be attractive to management and shareholders.

After the collapse of a second round of talks last week, PPC gave AfriSam until close of business on Friday to find a way to resolve the impasse.

The sides have previously failed to agree on how to value the deal and who will control the new entity. If PPC management including chief financial officer Tryphosa Ramano, remain resistant to a merger, AfriSam could attempt a hostile takeover, the people said.

The companies restarted talks in February as a way to deal with falling demand for cement in SA and an influx of new competitors. The CEOs of both companies have resigned during the negotiations.

“PPC’s focus is firmly on unlocking long-term sustainable shareholder value and we would review any proposed corporate action in light of our ability to achieve this,” spokeswoman Siobhan McCarthy said.

The Public Investment Corporation owns 60% of AfriSam.

The second largest shareholder is Phembani Group, the investment firm co-founded by MTN Group chairman Phuthuma Nhleko.