Ir­ish firm joins fight for PPC

• Dublin-based build­ing ma­te­ri­als com­pany joins AfriSam-Fair­fax and La­fargeHol­cim in bid for as­sets of SA’s largest ce­ment maker

Business Day - - FRONT PAGE - Mark Al­lix In­dus­trial Writer al­lixm@bdfm.co.za

PPC says it has re­ceived a non­bind­ing ex­pres­sion of in­ter­est from Ir­ish ce­ment maker CRH, putting three po­ten­tial bid­ders into the ring for the as­sets of SA’s largest ce­ment pro­ducer.

PPC says it has re­ceived a non­bind­ing ex­pres­sion of in­ter­est from Ir­ish ce­ment maker CRH, putting three po­ten­tial bid­ders into the ring for the as­sets of SA’s largest ce­ment pro­ducer.

CRH is in­di­cat­ing it is con­sid­er­ing sub­mit­ting an all-cash pro­posal to ac­quire a con­trol­ling stake in PPC.

The Dublin-based group is a di­ver­si­fied global build­ing ma­te­ri­als com­pany listed on the Lon­don, Dublin and New York stock ex­changes. It has a mar­ket cap­i­tal­i­sa­tion of €27bn.

CRH’s in­ter­est comes in ad­di­tion to AfriSam-Fair­fax, which has made a joint con­di­tional par­tial of­fer for the group, and in­ter­est from Eu­rope’s La­fargeHol­cim. The lat­ter says it will firm its non­bind­ing ex­pres­sion of in­ter­est in the week of Novem­ber 20.

PPC says CRH must now firm up its own ex­pres­sion of in­ter­est from this date. PPC’s share fell 5.22% at close of trade on the JSE on Mon­day.

“In an ef­fort to align the CRH process with that of La­fargeHol­cim and [AfriSam]-Fair­fax, the in­de­pen­dent board of PPC in­tends to pro­vide CRH an ini­tial pe­riod to con­duct due dili­gence of PPC to al­low [it to] sub­mit an up­dated ex­pres­sion of in­ter­est dur­ing the week com­menc­ing Novem­ber 20 2017, which will in­clude a value per share for PPC,” PPC said on Mon­day.

PPC has 11 ce­ment fac­to­ries in SA, Botswana, the Demo­cratic Repub­lic of Congo, Ethiopia, Rwanda and Zim­babwe. Ca­pac­ity is up to 12.7-mil­lion tonnes of ce­ment prod­ucts each year by 2018. The group has mostly com­pleted a large cap­i­tal ex­pen­di­ture pro­gramme, with newly com­mis­sioned op­er­a­tions in the rest of Africa set to con­trib­ute nearly 50% of group profit within two or three years.

Fair­fax’s of­fer to buy R2bn of PPC or­di­nary shares at R5.75 a share is much lower than val­u­a­tions made by the group’s big­ger share­hold­ers. These range from R8 to R10 a share.

The pro­posed merger ra­tio is based on a share ex­change of 58 PPC shares for 42 AfriSam shares. This val­ued PPC at a 62% pre­mium based on pro forma earn­ings mul­ti­ples ap­plied to the two busi­nesses, AfriSam said. The re­vised pro­posal in­cluded a R4bn re­cap­i­tal­i­sa­tion of AfriSam be­fore any merger with PPC.

Nige­rian ce­ment con­glom­er­ate Dan­gote had for­mally with­drawn its re­cent non­bind­ing com­mu­ni­ca­tion of in­ter­est in a pan-African merger. The spate of in­ter­est caused PPC’s share price to gy­rate wildly be­tween R3.50 and above R7.50 in the past three months.

Si­bonginkosi Nyanga, an an­a­lyst at Mo­men­tum Se­cu­ri­ties, said CRH’s non­bind­ing ex­pres­sion of in­ter­est showed that there were many com­pa­nies that thought PPC was good value. “We think the max­i­mum mar­ket value for PPC will be dis­cov­ered. Creat­ing a bid­ding war is the best way to max­imise the sale price and get the most favourable terms for PPC.”

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