Reuters – Africa’s richest man Aliko Dangote has joined the race to buy South African cement maker PPC, which is already the subject of a takeover bid valuing the company at $700 million. Dangote Cement, which is controlled by Dangote and is the biggest cement maker in Africa with a capacity of nearly 46 million tonnes a year, said in a statement that it was interested in buying all of PPC’s shares.
The expression of interest from the Nigerian company with a market capitalisation of $12 billion raised market hopes of a bidding war, sending PPC shares 5.5 percent higher to 6.29 rand. PPC’s local rival AfriSam launched an all-share merger proposal for South Africa’s biggest cement maker last week and PPC said it also had a third offer that was “credible and potentially value-enhancing for shareholders”.
“From the previous offer that was made, it was agreed in the investment community that it was undervalued. So now when the next bidder makes an offer and doesn’t put a price, there can only be speculation to the upside,” said Afrifocus Securities equity analyst Tinashe Kambadza. “Economic rational aside, it will all be about the bid premium.” The expansion of Dangote and the entry of new firms across Africa has led to an oversupply of cement-based products and competition as companies try to win market share. In February, former PPC chief Darryl Castle said PPC would be the “architects” of consolidation in the industry. Dangote Cement Plc (DCP), which has operations in 10 countries, is already present in South Africa through its 64 percent holding in Sephaku Cement.
“DCP hereby confirms that the board of directors of DCP has merely communicated its interest to the board of directors of PPC with respect to the acquisition of the entire share capital of PPC,” the Nigerian company said. This communication is still at the preliminary stage.” PPC said in a statement its independent board was considering the Dangote proposal. Shares in Dangote rose 5 percent to 211.5 naira ($0.69) in Lagos after the takeover approach was announced. The PPC board has already said AfriSam’s all-share proposal valuing PPC shares at 5.75 rand “fundamentally undervalues” the company, adding pressure on its local rival to sweeten the deal.
AfriSam and its backer, the African division of Canada’s Fairfax Africa Holdings, want to create an African cement giant with operations in six countries and the financial firepower to take on regional rivals, such as Dangote Cement. Last Monday’s merger proposal was AfriSam’s third attempt in three years to buy PPC. AfriSam, which is majority owned by the Public Investment Corporation pension fund, first proposed a merger in 2014 when PPC’s share price had been under pressure. If Dangote succeeds in buying PPC, the merged company would have a combined cement capacity of more than 57 million tonnes a year and give Dangote a majority of the South African market.
