Even though PPC’s (Pretoria Portland Cement) share price has been at an all time low (R6.40/ 15 September 2017), it seems as though the leading supplier of cement in Southern Africa with factories in South Africa, Botswana, Zimbabwe and Rwanda is still an appealing acquisition. First the possible merger between Afrisam and PPC, then the takeover bid from Dangote cement and now according to an article in the Sunday Times “LafargeHolcim, the world’s biggest cement maker, is also interested in the group”.
PPC has had it’s fair share of trouble these past few years, from boardroom battles to a down grade to junk status by Standard & Poor which according to PPC resulted in a liquidity crises and therefore a 93% plunge in it’s headline earnings per share.
Afrisam has been trying to form a merger with PPC for about 3 years, it seems to be more determined now even securing a cash injection from Canadian FairFax Financial Holdings and in return FairFax will get an equity stake in Afrisam. Negotiations between the two cement groups have not yet been concluded, although the PIC (Public Investment Corporation) which owns about 60% of Afrisam and 11% of PPC is in support of the merger.
Nigerian Dangote cement is now also interested in acquiring PPC. The combination would create an African cement giant, one capable of expanding beyond African soil (especially considering the fact that Dangote cement also owns 64% of Sephaku cement). This would also make it easier for the African cement producers to compete with new competitors.
However, even though PPC would benefit more from Dangote cement, I would still like to see them form a merger with Afrisam. A take-over by Dangote could be disastrous for Afrisam and it would have an impact on our national economy. PPC and Afrisam are South Africa’s largest and second largest cement producers respectively, what we need is for them to join forces and compete with Dangote cement, lafarge, etc.