PPC Ltd. and closely held competitor AfriSam Group (Pty) Ltd. called off a merger of South Africa’s two biggest cement makers after failing to agree on the terms.
“The parties have not been able to reach consensus on the terms of the merger and therefore have terminated their discussions,” Johannesburg-based PPC said in an e-mailed statement on Friday. “The company is unable to elaborate on the detailed reasons for this termination.”
PPC received an offer in December to combine with Johannesburg-based AfriSam to boost the companies’ African expansion plans. A tie-up was supported by the Public Investment Corp., Africa’s biggest money manager, which is responsible for most South African government-worker pension funds and an investor in both companies.
Cement companies are expanding in African countries as governments invest in infrastructure to support economic growth. PPC’s international markets include the Democratic Republic of Congo, Rwanda and Ethiopia, while AfriSam has operations in Tanzania, Lesotho and Botswana. They face competition from European companies including Paris-based LaFarge SA and HeidelbergCement AG of Germany, while Lagos, Nigeria-based Dangote Cement Plc, Africa’s biggest cement maker, is also opening plants in new markets.
“Over the last few months, we applied our minds extensively to the proposed merger with AfriSam,” said PPC Chief Executive Officer Darryll Castle, who was appointed in December. “Ultimately we decided not to proceed with the proposed deal.”
The offer from AfriSam was made after a three-month boardroom battle at PPC following the resignation of CEO Ketso Gordhan in September. The fallout has wiped more than 40% from the value of the company due to uncertainty surrounding the new leadership, increased competition and the proposed merger with AfriSam.
PPC sales gained 9% to R9 billion in the year through September, while profit declined 9% to R849 million. AfriSam’s website doesn’t contain financial information. A spokesman for the PIC, AfriSam’s majority owner, didn’t immediately respond to a request for comment.
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