AfriSam agrees that merger offer for PPC is ‘fair’

SOUTH African cement maker AfriSam said yesterday that a merger proposal valuing its rival PPC at $700 million (R9.31 billion) was fair, suggesting it has no intention of sweetening its offer.

Shares in PPC dropped 2.52 percent to R6.19 at 1.14pm yesterday, but still well above a R5.75 per share valuation in AfriSam’s proposal as the company is also being pursued by Nigeria’s Dangote Cement and one other unspecified bidder.

Comments posted on AfriSam’s website, which is backed in the transaction by the African unit of Canada’s Fairfax Africa Holdings, comes days after PPC’s board said that the proposal “fundamentally undervalues” South Africa’s biggest cement producer and that it expects a higher offer.

“AfriSam and Fairfax Africa believe that the partial offer and merger reflect the fair and relative value of PPC and AfriSam based on the unaffected market price, as of August 30, 2017, for PPC shares and other valuation benchmarks,” AfriSam said.

The all-share offer from AfriSam, in conjunction with a cash offer of R2bn for a 23 percent stake from Fairfax Africa, values PPC shares at R5.75, but expectations of a higher bid, either from AfriSam or others have kept the share price above that level.

AfriSam’s proposed merger is based on a share exchange ratio that will see PPC owning 58 percent of the combined entity and AfriSam owning 42 percent. It also represents a 57 percent premium for PPC shareholders based on projected earnings.