Nompumelelo Magwaza
PPC and AfriSam halted talks after they could not reach a consensus on the terms of a merger, both the companies said on Friday.
The news saw PPC’s share shoot up by as much as 5.9 percent to R19.02 before closing up 5.73 percent at R18.99. AfriSam is an unlisted company.
This comes a few weeks after PPC, a listed cement and lime producer, said it continued to consider the indicative non-binding proposal from AfriSam for a merger between the two cement producers.
In January, Bheki Sibiya, PPC’s chairman, told Business Report that both the companies were considering the indicative merger proposal by AfriSam, saying that the group was busy with the first phase, which involved its executives looking at the business case for the possible merger.
But on Friday, both companies said they had been involved in extensive discussions but could not reach consensus.
“In lieu of confidentiality agreements between the two parties, the company is unable to elaborate on the detailed reasons for this termination,” said PPC in a statement.
“Looking at the the debt load of both the businesses, AfriSam has the higher debt. This could probably be the main reason because if you merged two businesses and one takes on more liability,” said Sasha Naryshkine, a fund manager at Vestact.
Although PPC’s shares were trading at multi-year lows they had climbed on Friday, he said.
“This does not mean they traded well, though.”
On March 16, PPC shares fell as low as R16.46, the lowest level since at least 1995. “This tells you that infrastructural spend was very low at the moment,” Naryshkine added. He said the lifting of the share price had everything to do with the announcement about the halting of the mooted merger.
“It still does not mean that they are a good business. It might be an opportune time to own them, only if one thinks that there would be some regional growth or private and government infrastructural spend, then its worth it,” Naryshkine said.
PPC’s new chief executive, Darryll Castle said: “Over the last few months, we applied our minds extensively to the proposed merger with AfriSam. Ultimately, we decided not to proceed with the proposed deal.”
Castle said he had spent his first week as chief executive acquainting himself fully with company’s operations, “meeting the people and reviewing its strategic direction and growth strategy”.
PPC’s board said it remained committed to its strategy of enhancing the company’s position in Southern Africa and expanding its footprint into other African countries.
Castle said: “I have been most impressed with what I have found and very excited about the company’s future. I have established a number of priorities for the company and am looking forward to discussing these in detail when we report our interim results on May 19.”
AfriSam said it would also continue to its growth strategy of sustainable, value enhancement for all stakeholders.
The Public Investment Corporation, managers of the Government Employees Pension Fund, holds 12.57 percent of PPC and 66 percent of AfriSam. PPC’s former chief executive Ketso Gordhan had said the proposed merger between the two groups could be rejected by competition authorities.