Two stories about the potential PPC and AfriSam merger published today hold conflicting views on the benefits of the proposal.
CNBCAfrica.com reports an analyst’s view that the merger does not make sense for PPC’s African expansion strategy, which looks to extend the company’s reach beyond South Africa. Charl Kocks, principal at Ratings Afrika, told the news service that the status of the cement industry in South Africa, both in terms of demand and competition, would work against the proposed merger. “[W]hy would one want to be large in the market where you are not growing as you want to?” Kocks asked. He further questioned the role of the Public Investment Corporation (PIC) in the deal. PIC has a minority stake in PPC and a majority holding in AfriSam. “What has been PIC’s role in the Afrisam and PPC transaction, to what extent does an old board give a commitment that they will be taking this deal forward and to what extent will the new board decide if they want to move forward with the transaction or not,” he asked.
Meanwhile, eProp Commercial Property News writes that the merger of the two companies gives them ‘the best possible chance to compete in what is already a highly competitive African cement market’. Citing ‘sources close to the matter’, the report says that AfriSam proposes a merger ratio of 55 – 65% in favour of PPC and 25 – 45% in favour of AfriSam, with shares exchanged rather than cash. AfriSam reportedly hopes to start due diligence shortly and achieve a full merger agreement by the end of March.
Edited from various sources by Katherine Guenioui