The purchase is on condition that the cement maker, PPC agrees to a merger with AfriSam.
The revised merger proposed by AfriSam includes a R4 billion recapitalisation of AfriSam by Fairfax Africa prior to the merger with PPC. The proposed merger ratio is based on a share exchange of 58% PPC and 42% AfriSam.
Fairfax’s Africa unit is prepared to purchase R2 billion in shares priced at R5.75 each, said AfriSam in a statement. The Offer represents an attractive 28% premium to PPC’s 30-day volume weighted average share price as at 30 August 2017, and provides substantial liquidity for those PPC shareholders who wish to exit a portion of their position.
“We are excited that Fairfax Africa sees the investment potential in the combined company as evidenced by its R4 billion investment committed to AfriSam and R2 billion Partial Offer to PPC shareholders,” said Rob Wessels, acting CEO, AfriSam.
“Among other benefits, the investment by Fairfax Africa will greatly reduce the underlying debt of the merged entity,m which will have sufficient liquidity and capital to compete in its current markets and selectively target growth opportunities on the continent.”
Wessels said he looked forward to the outcomes of the merger, as he believed the combined company would be well positioned to capitalise on higher growth in Africa, building on the foundation already laid by the two companies across Africa.
“The significant capital investment by Fairfax will settle almost all of AfriSam’s third-party debt and place the combined company in a strong financial position. The merger values PPC at a significant 62% premium based on pro forma earnings multiples applied to the two businesses. Over time, will become a preeminent and leading African player in cement,” commented Wessels.
The investment in AfriSam is subject to the proposed merger becoming unconditional in all respects.