Bidding war for PPC on the boil
More interest in cement giant
SOUTH Africa’s biggest cement maker, PPC, on Friday saw its share price spike 2.41 percent as yet another suitor, LafargeHolcim, approached the takeover-vulnerable company as it looks to cement its presence on the continent.
The news firmly puts PPC in the midst of a bidding war within and outside South African borders.
Lafarge, despite cutting its double-digit earning target in the current financial year on Friday on the back of its adjusted earnings for the third quarter of the year, announced that it had entered into talks with PPC over a potential acquisition.
PPC on Friday said that LafargeHolcim intended to submit a firm intention offer during the week commencing on November 20, following the completion of a due diligence process.
“PPC shareholders are advised that PPC has received a non-binding expression of interest from LafargeHolcim, which contemplates a combination of certain African assets, a partial cash offer and a special dividend,” the company said.
No further details of the talks or the mooted value of the transaction were advanced on Friday.
The African cement sector is currently punching below its economic weight and is expected to see significant growth in the coming years.
Currently, cement use in Africa is estimated to be less than 50kg per person, with some countries as low as 30kg, which compares with China’s 1 737kg per person and Europe’s 230kg.
LafargeHolcim was established in 2015 following the €41 billion (R671.5bn) merger of France-based Lafarge and its Swiss rival Holcim.
The merger of the two kicked off industry consolidation in Europe.
Just last month HeidelbergCement acquired the Italian assets of Cementir, while CRH took over Ash Grove Cement for $3.5bn (R49.36bn).
Jan Jenisch, LafargeHolcim’s chief executive, on Friday said the company aimed to generate leading margins and an attractive growth profile.
“While I am reviewing the business, I have an immediate focus on simplification, cost discipline and performance management.
"We will reduce complexity and focus on operational excellence in order to fully realise the potential of LafargeHolcim,” Jenisch said.
The move by Lafarge marks the third company to show interest in taking over PPC in recent months.
Rival AfriSam has already made three attempts to merge with PPC in pursuit of creating a pan-African cement group with assets across six countries. The bid by AfriSam is backed by the African unit of Canada’s Fairfax Africa Holdings.
Fairfax has put forward a bid to buy PPC stock for $140 million – this is a deal that the Public Investment Corporation (PIC) also wanted to push through with ambitions of creating a national champion.
In September, Dangote Cement, the conglomerate run by Aliko Dangote, Africa’s richest person, approached PPC with the intention of buying its entire share capital. However, this month Dangote walked away from the potential deal, despite the Lagos-based group retaining an interest in PPC “at the right price”.
Dangote, with a presence in 10 countries, is already present in South Africa through its 64 percent holding in Sephaku Cement.
PPC said the offer by Fairfax was still under consideration.
“PPC shareholders should note that the process in respect of the Fairfax partial offer, announced by PPC on SENS on September 4, 2017, is still proceeding in accordance with the Independent Board process described in the announcement published on SENS by PPC on October 3, 2017.”
Kwame Antwi, an analyst at UBS, on Friday said PPC had a significant value, which potential investors see and want to unlock. “The cement consumption in Africa is lower than most parts of the world, and the continent is also likely to experience some of the most rapid urbanisation rates in the foreseeable future. PPC has a good portfolio of assets that are scalable,” Antwi said.
Despite Lafarge’s entry into the play for PPC assets, the PIC’s hand in the potential Afrisam merger looks likely to emerge strongly in the coming months to sway the deal in favour of the PPC-Afrisam tie-up. The PIC has a stake of 11 percent of PPC, while it has a controlling 60 percent in Afrisam, making the potential deal the most likely.
PPC shares closed at R6.80 on the JSE on Friday.