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Fairfax Africa proposed purchase and merger of PPC and Afrisam


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I have been following this story since it broke in early September.  It's turning out to be quite the novela with all sorts of twists and turns.


If I understand things correctly, Fairfax Africa has proposed to partially buy PPC (which is a supplier of cement in Southern Africa) for $155m (or 23% of the company before merger).  At the same time, Fairfax Africa has offered to subscribed to shares of AfriSam for $309m (representing 60% of AfriSam).  AfriSam would then use the proceeds to pay down debt, and then PPC and AfriSam would merge. Afrisam is also a supplier of cement.  The deal had the support of AfriSam's largest shareholders.


Shortly after the deal was announced, one of Africa's richest guys Alika Dangote wanted to put a bid in as well, but about two weeks ago declined to make any offer.


The latest news is that other minority shareholders are saying the Fairfax offer for PPC is too low. These shareholders apparently represent more than 25% of the ownership of PPC. 




Apparently, other construction and cement companies are considering making bids as well.


Every few days, there seems to be a development to this story.  As long as there is a margin of safety in the price, I hope Fairfax gets this company.  I like the idea of owning a large cement company is a growing Africa market.




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I am not sure if my math is correct, but here goes..


According to the AfriSam website, the annual production capacity of AfriSam is 5.9m tons and PPC is 11.4m tons, for total of 17.3m tons.


According Fairfax Africa press release, the combined offer of $464 million (155 + 309) equals 38.6% of the combined company.  This implies a total value of $1.2B (464m/.386).


$1.2b/17.3m tons = $69.48/ton.


I am a newbie when comes to this type of evaluation.  Please take it with a grain of salt.

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  • 2 weeks later...



Interesting stat:


"Cement use in Africa is less than 50kg per person, with some countries as low as 30kg, according to London-based Bloomberg Intelligence analyst Sonia Baldeira. That compares with China’s 1,737kg per person and Europe’s 230kg. "You can see the huge potential that Africa represents in the next 50 years," she said."

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  • 6 months later...

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