South Africa: PPC receives merger offer from AfriSam

South Africa’s leading cement producer, PPC, has received a merger offer from local rival AfriSam that would create a dominant player in the country.

 “The Board is considering the indicative proposal and will make a further announcement in due course once it has concluded its consideration of the indicative proposal,” PPC said in a statement today.

PPC has been embroiled in a boardroom battle since former CEO Ketso Gordhan resigned in September, leading some industry commentators to speculate that PPC’s public problems could have possibly depressed the company's valuation. Last week PPC and its investors bowed down to shareholder pressure and agreed to reshuffle the company's board but without reinstating the former chief executive who had lobbied to return as a director.

Should PPC agree to the proposed merger, the deal may be rejected by South Africa’s competition authorities on the basis that it would create a domestic cement company with a dominant position, Mr Gordhan told Bloomberg in an interview. AfriSam is the second-largest producer in South Africa by capacity and the market share of the two companies combined “would be close to 60 per cent,” he added.

With excess cement capacity in South Africa, the move could help the combine group close some less efficient plants and focus on overlaps. The proposal may be attractive to PPC as combining operations could lead to cost savings, Mr Gordhan highlighted.

As part of PPC’s strategy and long-term plan to grow revenue by 40 per cent outside of South Africa, the company is expanding its operational footprint into the rest of Africa, including Algeria, Botswana, DRC, Ethiopia, Mozambique, Rwanda and Zimbabwe. AfriSam is also developing projects elsewhere on the continent and has operations in Tanzania, Lesotho and Botswana.