PPC’s Biggest Shareholder Is Said to Back Fairfax-AfriSam Offer

JOHANNESBURG (Capital Markets in Africa) – PPC Ltd.’s largest shareholder is supporting a joint offer for South Africa’s biggest cement maker from domestic rival AfriSam Group Pty Ltd. and Canadian insurer Fairfax Financial Holdings Ltd. as the tie-up would create a national champion, according to people familiar with the matter.

The Public Investment Corp., Africa’s biggest money manager, sees the three-way deal as a way for an enlarged cement maker to expand more effectively on the continent, said two of the people, who asked not to be identified as the PIC’s position is private. The manager of South African state-worker pension funds also sees significant cost savings from the combination, the people said.

PPC’s board will consider all offers equally, in the best interest of shareholders, a spokeswoman said in emailed comments.

A spokesperson for the PIC didn’t immediately comment. AfriSam didn’t immediately respond to an emailed request for comment. Fairfax didn’t answer a call placed outside office hours.

The PIC first indicated its support for a merger between PPC and AfriSam in a letter last month, before Fairfax entered the talks. Its continued backing will come as a boost to the two potential buyers as they prepare for a possible challenge from rival bidders. Nigeria’s Dangote Cement Plc, controlled by Africa’s richest person, Aliko Dangote, is among those considering a counteroffer, people familiar with the matter said last week. Lafarge Holcim Limited, the world’s biggest cement maker, is also monitoring PPC’s situation, they said.

The PIC owns about 11 percent of PPC, according to data compiled by Bloomberg. It’s also the biggest shareholder in AfriSam with about 60 percent.

Seeking Cash
PPC shares fell 5.1 percent to 6.13 rand as of 12:09 p.m. in Johannesburg on Tuesday, valuing the company at 9.8 billion rand ($758 million). The decline ended a run of six consecutive daily gains since Toronto-based Fairfax announced its Sept. 4 proposal, which includes the purchase of a 2 billion rand stake in PPC at 5.75 rand per share while helping AfriSam pay off its debt. All PPC investors, excluding management, are entitled to take part in the partial offer and can sell a proportionate amount to their shareholdings.

Fairfax may have to raise the offer for PPC shares above 5.75 rand if another bid is tabled, according to one of the people. Dangote’s proposal values PPC stock at 6.25 rand each, a second person said, declining to give further details. PPC management may see a full-cash offer as more attractive than the Fairfax/AfriSam proposal, though one has yet to materialize, that person said.

A spokesman for Dangote didn’t immediately comment when contacted by phone.

PPC has operations in six African countries, though a new project in Democratic Republic of Congo has been slow to get off the ground and the company is in talks with lenders to restructure debt related to the plant. AfriSam’s main operations outside South Africa are in Tanzania.