National Cement Company Ltd, a subsidiary of Devki Group with interests in cement and other products has sealed a deal to buy out the Kenyan assets of ARM Cement Plc, crucial Kenyan mining, and manufacturing company.
The deal stipulates that National Cement Company will acquire ARM and the assets of its subsidiaries in Kenya for a consideration of $50 million. To enable the purchase, the International Finance Corporation (IFC) and KCB Group will finance part of the bid.
According to records, IFC and KCB have been funding National Cement for years, with their commitment enabling the company to win the ARM auction. Following a successful bid, National Cement is buying ARM Kenya out of bankruptcy, a deal which sets both companies on different courses. According to National Cement, this transaction is in line with the Company’s growth strategy in Kenya to position itself as the leading cement manufacturer in the region.
National Cement Company has steadily pushed for growth and stretched its operations through strategic expansions, with funding support in the form of equity and debt from financial institutions such as the IFC. On its recent acquisition, George Weru, an executive with PwC and one of the administrators of ARM Cement, said the deal certainty, including proof of funds, was one of the reasons National Cement’s bid was successful.
Narendra Raval, the chairman and major shareholder of National Cement told The Business Daily that the company can afford 50 percent of the total buyout sum, and the remaining funds will come from the IFC.
“We can fund half The deal (Sh2.5 billion) from our own cash flows. The balance we will get from IFC and KCB,” he said.
The company plans to direct a substantial part of the new investment into upgrading ARM’s plant and equipment, ultimately enhancing productivity and efficiencies. The company will invest Sh2 billion to improve ARM’s operations over the medium term. Furthermore, the acquisition will raise National Cement’s annual production to 1.4 million tonnes and boost its market share to 13 percent from the current eight percent.
On ARM’s part, selling off its Kenyan unit leaves the administrators to focus on Tanzania, which is its largest subsidiary and apparently expected to fetch a higher price than the local unit. The company has a deep presence in Africa, with subsidiaries in Rwanda, Tanzania, and South Africa.
Resulting from considerable losses, ARM has a record of several debts amounting to huge sums, which is primarily the reason for the recent sale of its Kenyan assets. In August 2018, ARM was placed under administration by some of its creditors and its shares suspended from trading on the Nairobi Stock Exchange.
Africa’s vast potential for growth has seen more companies expand their presence across the continent towards the common goal of exploring economic potentials, which is the case with ARM’s and National Cement’s transaction.