PPC issues its fifth cautionary notice
PPC ISSUED a fifth cautionary announcement to its shareholders about the proposed merger talks it is involved with AfriSam. This follows four other announcements in February, March, May and June, issued since the beginning of the year.
“Shareholders are advised that the due diligence assessment and the discussions regarding the proposed merger are still in progress and, if implemented, may have a material impact on the price of the company’s shares. Accordingly, shareholders are advised to continue exercising caution when dealing in securities of the company until such time a further announcement is made,” the group said.
A merger between the companies would result in the creation of a South African-owned cement producer well placed to develop as a major African cement producer. The merger talks between the two companies have been going on since 2014. However, it is only now that the talks look like they may lead to a successful merger.
When the talks gained momentum in March, AfriSam chief executive Stephan Olivier said that he was stepping down, declining to extend his contract with the company. Rob Wessels has since taken over from Olivier as acting chief executive until the outcome of the merger talks have been finalised.
The value of the proposed merger is not known, as it is still in its early stages. It will also have to pass the Competition Commission approval.
PPC’s share price was up 1.68 percent in the afternoon to trade at R4.85. However, by the end of the day it closed at R4.93 a share.
Both companies have operations in African countries. AfriSam has a cement plant in Tanzania and PPC has plants in Zimbabwe, Rwanda, the Democratic Republic of Congo and Ethiopia. The companies are battling with government’s low infrastructure spend, tough competition, low cement prices and the dumping of cheap cement from Asia. Combining the two companies will strengthen their market share in the continent.
In South Africa, the group said during the presentation of its year results to end March, that the real gross domestic product growth had disappointed, averaging only 1 percent over the past three years. “We expect a slight improvement to 2 percent forecast only in 2019,” it said.
It also noted that consumer confidence had been muted mainly due to consumers being downbeat on the economic outlook and their personal finances.
“Over the past few years, public sector expenditure on infrastructure in the provinces has consistently exceeded the allocated budget, while this has been the opposite in local government and with state owned companies – 86 percent of public sector infrastructure spend is executed by provincial government, local government and state owned enterprises,” the group said.
AfriSam’s proposed merger with PPC may reach an accord soon and would create an African cement giant.