Nigeria’s Dangote Cement has officially communicated its interest in buying over South Africa’s largest cement company, PPC Group Limited.
In a press statement signed by Mahmud Kazaure, its company secretary, which was released late Wednesday to the Nigerian Stock Exchange, Dangote Cement Plc (DCP) confirmed that its board of directors “has merely communicated its interest to the board of PPC with respect to the acquisition of the entire share capital of PPC and that the communication is still at the preliminary stage.”
The confirmation is coming after earlier reports indicated that Aliko Dangote, Africa’s richest man, is among those considering counter offers for PPC Group Ltd.
Dangote’s interest was specifically reported as signaling the start of a possible bidding war for the South African biggest cement maker, since a joint approach by Canada’s Fairfax Financial Holdings Ltd. and domestic rival AfriSam Group Pty Ltd. is already on the table.
PPC, on the other hand, was reported to be open to considering any rival offers that it would present to shareholders in early October, which is paving the way for the Dangote bid.
While PPC will consider all bids, the Public Investment Corp. (PIC), its largest shareholder, supports a tie up with AfriSam and Fairfax, according to reports.
On the other hand, analysts believe DCP has the capacity to pull the deal off despite other interests in PPC.
“It is a very liquid company with a very strong cash flow. It is a good strategy that would help Dangote consolidate leadership in the South African market,” Pabina Yinkere, an analyst at Vetiva Capital Management, told Bloomberg in Lagos
A takeover of PPC by Dangote would combine two of Africa’s largest cement makers with operations throughout the continent. It would also scupper the South African company’s plans to merge with AfriSam, a deal that the PIC wanted to get through to create a national champion.
Africa’s biggest money manager owns about 11 percent of PPC, according to data compiled by Bloomberg. It’s also the biggest shareholder in AfriSam with about 60 percent.
Dangote has been expanding out of Nigeria, its biggest market, and has operations in 14 other African countries. Aliko Dangote, who also has interests in sugar, flour, and packaged food businesses, has a net worth of $11.4 billion, according to the Bloomberg Billionaires Index.
Dangote is also said to be open to a sale of all or part of its Pretoria-based Sephaku Holdings Ltd. unit to win regulatory approval for a takeover.
LafargeHolcim Ltd., the world’s biggest cement maker based in Jona, Switzerland, and Germany’s HeidelbergCement AG are also monitoring PPC’s situation, according to reports.
PPC shares rose 2.4 percent to R6.10 as of 9:33 a.m. in Johannesburg, increasing gains in the past month to 62 percent and valuing the company at R9.7 billion ($738 million). Dangote, listed in Lagos, has a market capitalization of about $10 billion.
Frontpage December 13, 2018