PPC says Fairfax offer too low

Regional cement maker Pretoria Portland Cement (PPC) says the partial offer by Fairfax Africa Investments Proprietary Limited to acquire R2 billion of the company’s issued ordinary shares at an offer price of R5.75 per share undervalues the company and is evaluating two other bids to maximise shareholders value.

Fairfax is a subsidiary of Fairfax Africa Holdings Corporation (Fairfax Africa), an investment holding company listed on the Toronto Stock Exchange, with a market capitalisation of over $600 million and approximately $400 million of investable cash.

PPC operates 11 cement factories in South Africa, Botswana, the Democratic Republic of Congo, Ethiopia, Rwanda and Zimbabwe.

The Fairfax offer is contingent upon shareholders of PPC approving the proposed merger between PPC and AfriSam.

AfriSam, another South African cement maker, last week launched a third bid for PPC with an offer that valued its larger rival at about R9.2 billion ($709 million) at R5.75 per share.

 PPC board said AfriSam’s offer was too low.

Fairfax’s offer is for 22 percent of PPC’s total issued share capital.

“Shareholders are hereby advised that on 1 September 2017, Fairfax Africa Investments Proprietary Limited (“Fairfax”), on behalf of a subsidiary to be nominated by Fairfax (the “Offeror”), delivered to the board of directors of PPC a letter (“Firm Intention Letter”), indicating that the Offeror has a firm intention to make a partial offer to acquire ordinary shares representing a value of R2 billion of the issued ordinary stated capital of PPC, at an offer price of R5.75 per ordinary share of PPC (“the Partial Offer”),” the company said in a cautionary statement.

However, PPC said it has also received two other proposals which valued the company higher.

“Shareholders are advised that the Board has recently received, in addition to the Firm Intention Letter, credible Indicative Proposals from two other trade bidders, each in relation to a potential pan-African combination with PPC (one of which also includes a potential cash component), further details of which remain confidential at this stage,” PPC said.

Additionally, PPC said its independent board is of the view that Fairfax’s offer undervalues the company and does not maximise shareholder value.

“However, based on the prior extensive engagement in respect of a possible merger with AfriSam, and the Independent Board’s own views regarding the underlying value of PPC, it notes (independent board), as a preliminary observation, that the offer price of R5.75 per ordinary share fundamentally undervalues PPC and, when considered in conjunction with the proposed exchange ratio, does not constitute sufficient compensation for PPC’s shareholders,” it said.- The Souce

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