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LafargeHolcim interested in PPC

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World Cement,

LafargeHolcim is the latest company to express an interest in South Africa’s largest cement maker PPC. The Switzerland-based cement major said last week that it was in talks with PPC’s board of directors “regarding a possible transaction in Africa.”

LafargeHolcim’s expression of interest “contemplates a combination of certain African assets, a partial cash offer, and a special dividend,” PPC said in an announcement to the Johannesburg Stock Exchange. The Swiss company would make a firm offer during the week beginning 20 November, PPC continued, after it had completed due diligence.

The move from LafargeHolcom, South Africa’s third-largest cement maker, came as something of a surprise to analysts, coming so soon after the installation of a new CEO at LafargeHolcim.

“I thought M&A would be off the table for a while,” said Justin Jordan, Equity Analyst at Jeffries. “However, LafargeHolcim is the Number 3 player in South Africa currently. Doing due diligence on the Number 1 player [PPC], if it is already ‘in play’, is a natural thing for them to do.”

It was also unclear whether LafargeHolcim were interested in all of PPC – or only some of its assets.

A PPC-LafargeHolcim tie up would create potential competition issues, as it would have a market share in South Africa of close to 50%. However, a deal for PPC’s assets outside of South Africa might be a more attractive prospect, Mish-al Emeran of Electus Fund Managerst to local news site, BusinessLIVE. In addition to South Africa, PPC has assets in Botswana, the Democratic Republic of Congo, Ethiopia, Rwanda, and Zimbabwe.

The move comes as PPC continues evaluation of a partial offer by Fairfax Africa Investments Proprietary Ltd, which would see the company merge with its closest rival, AfriSam - another deal that would face close scrutiny from regulators. Nigeria-based Dangote Cement and Irish building materials giant, CRH, have also been linked to the company.

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