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AfriSam said to appoint new CEO to accelerate cement merger

He will be replaced on a short-term contract by Rob Wessels.

AfriSam Group is set to replace its chief executive officer to help pave the way toward a merger with listed rival PPC, according to three people familiar with the matter.

Stephan Olivier’s departure from the South African cement company after almost seven years at the helm could be announced as soon as Friday, said the people, who asked not to be identified as the information is private. He will be replaced on a short-term contract by Rob Wessels, a former chief investment officer at AfriSam’s black empowerment partner Phembani Group, they said. That would leave PPC CEO Darryll Castle as the prime candidate to take control of the combined entity.

The new management team will be expected to secure a tie-up with Johannesburg-based PPC, possibly through a reverse of AfriSam into its competitor’s listing, two of the people said. Phembani, co-founded by MTN Group chairman Phuthuma Nhleko, will own a significant stake in the combined company alongside the Public Investment Corporation, Africa’s largest money manager and AfriSam’s biggest shareholder, they said.

“Finer details such as executive changes and possible asset sales have not yet been defined,” Olivier said in emailed comments on Thursday. “The proposed transaction will enhance the goals of achieving greater levels of black industrialisation in South Africa.”

“PPC is not in a position to comment on the executive structure of the merged entity should the merger proceed or to speculate on conditions that may be imposed by the Competition Commission following its evaluation of a merger,” Siobhan McCarthy, PPC’s general manager of communication, said in emailed comments on Thursday. An assessment of the potential merger “is expected to take up to six months and the outcome will be communicated on completion.”

Empowerment groups such as Phembani help South African companies comply with government initiatives to boost black involvement in the economy to make up for discrimination during apartheid. A spokesperson for the business declined to comment.

Reviving talks

PPC and AfriSam said last month they had revived talks to merge two years after abandoning an initial attempt designed to pool resources in a market suffering from weak prices and demand. Three of the issues to be resolved are potential concerns by antitrust regulators, the appropriate merger ratio, and where savings can be made, PPC’s Castle said at the time. Both companies have battled depressed prices in their home market, while PPC is expanding in sub-Saharan Africa with new plants in countries including Zimbabwe, Democratic Republic of Congo and Ethiopia.

While new cement makers have made the South African market more competitive, PPC and AfriSam would consider the sale of operations in cities including Port Elizabeth, Bloemfontein and Kimberley to dispel antitrust concerns, the people said.

PPC shares rose 4.3% to R6.79 at the close in Johannesburg, valuing the company at R10.8 billion ($848 million). The stock traded at R7 at the close on February 10, the trading day before the AfriSam talks were announced.

“Should the proposed merger proceed it will result in the creation of a South African-owned cement producer that is financially stronger, operationally more efficient, has deeper technical capability and is well placed to develop as a major African cement producer,” PPC’s McCarthy said.

© 2017 Bloomberg

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