Dangote Cement has approached PPC about a takeover deal, signaling the start of a possible bidding war for South Africa’s biggest cement maker after an earlier offer led by Canada’s Fairfax Financial Holdings.
Dangote has told PPC’s board that it’s interested in buying “the entire share capital,” the Lagos-based company said late on Wednesday in a statement to the Nigerian Stock Exchange. “This communication is still at the preliminary stage,” the cement maker said.
The approach by the company owned by Aliko Dangote, Africa’s richest person, follows a joint offer from Toronto-based Fairfax and PPC’s domestic rival AfriSam Group. While PPC will consider all bids, the Public Investment Corporation, its largest shareholder, supports a tie up with AfriSam and Fairfax, people familiar with the matter said earlier this week. LafargeHolcim, the world’s biggest cement maker, is also monitoring PPC’s situation, the people said.
“The independent board of PPC is considering the indicative proposal and will make a further announcement in due course,” the South African company said in a statement on Thursday, confirming the approach.
PPC shares rose 4% to R6.20 as of 1:04pm in Johannesburg, increasing gains in the past month to 67% and valuing the company at R9.7 billion ($738 million). Dangote, listed in Lagos, has a market capitalisation of about $10 billion.
“Dangote has the capacity to pull the deal off,” Pabina Yinkere, an analyst at Vetiva Capital Management, said by phone from Lagos. “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.”
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% of PPC, according to data compiled by Bloomberg. It’s also the biggest shareholder in AfriSam with about 60%.
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