Displaying items by tag: Merger

Europe: RHI and Magnesita have announced divestment agreements ahead of their proposed merger. RHI has signed a contract with a European refractories supplier for an undisclosed sum regarding the sale of its dolomite business in the European Economic Area. The sale consists of the production sites at Marone in Italy and Lugones in Spain. Magnesita has entered into a definitive agreement with Intocast to divest its business related to the production and supply of magnesia carbon bricks produced at the company's Oberhausen plant in Germany for Euro20.3m. Both sales were required by the European Commission as part of the merger process.

“With the sale of the two sites, the combination of RHI with Magnesita is also still right on schedule,” said RHI’s chief executive officer Stefan Borgas with regards to his company’s divestments “We expect the confirmation by the European Commission in the near future.”

RHI signed a contract in August 2017 to sell its production sites at San Vito in Italy and Sherbinska in Russia that produce fused cast refractories for the glass industry. Production at the company’s plant at Aken in Germany was stopped in the first half of 2017 for an indefinite period. RHI plans to sell or close the plant to maintain its production utilisation rate across the business.

South Africa: Canada’s Fairfax Financial Holdings has made an offer of US$154m to buy a stake in PPC on condition that the cement producer agrees to a merger with AfriSam. Fairfax will also invest a further US$309m to pay off AfriSam debts to aid the deal, according to the Cape Times newspaper. The proposed merger ratio is based on 58% PPC and 42% AfriSam.

PPC said to its shareholders that it had received two other offers from trade buyers about a ‘pan-African combination’ with PPC. It added that although it had yet to ‘fully consider’ the Fairfax proposal, the offer was ‘fundamentally’ undervalued.

South Africa: Negotiations between PPC and AfriSam, two of South Africa's biggest cement producers, about a potential merger have reached a make-or-break stage, according to local press, after AfriSam cancelled the heads of terms it had entered into with PPC back in February 2017.

Despite the cancellation of the heads of terms, AfriSam acting chief executive Rob Wessels said the company remained committed to pursuing a transaction and intended to submit a new proposal regarding a possible merger to PPC.

"AfriSam remains firm that a transaction between AfriSam and PPC will greatly benefit the stakeholders of both companies. For this reason, we continue discussions with PPC and will explore other alternatives available to us,” said Wessels. "It remains our belief that a transaction between the two companies offers the local cement industry an opportunity to develop a champion with the required scale, operational efficiency and balance sheet to enable further investment opportunities in South Africa and the rest of the continent."

However, PPC chairperson Peter Nelson said they had been involved in the negotiations for six months and there came a time when it was necessary to halt them. Nelson added that the negotiations would only continue beyond 1 September 2017 if the new proposal tabled by AfriSam was ‘of sufficient interest and attraction and fair to shareholders and warranted extending’ the negotiations. "We can't carry on forever,” said Nelson. “A lot of shareholders are frightened about the prospect.”

Brazil: The Brazilian competition authority CADE has cleared the proposed merger between Brazil’s Magnesita and Austria’s RHI Group without restriction. This is the last major regulatory approval the merger process has required. RHI and Magnesita announced in October 2016 that were to merge to create a new refractory company called RHI Magnesita in 2017.

Belgium: The European Commission has cleared a proposed merger between Brazil’s Magnesita and Austria’s RHI Group subject to the divestment of a number of production sites in Europe. Magnesita is required to sell its plant in Oberhausen, Germany along with its Oberhausen business in the European Economic Area (EEA). RHI is required to sell its dolomite business in the EEA including plants in Maroni, Italy, and Lugones, Spain. Magnesita and RHI said they are speaking to potential buyers at present.

“With today’s milestone, we have come significantly closer to the planned merger with Magnesita – and thus a globally leading company in the refractory industry which optimally combines the strengths of both companies,” explains Stefan Borgas, chief executive officer (CEO) of RHI and designated CEO of the future RHI-Magnesita Group.

Outstanding approvals required to complete the merger include that from the Brazilian Antitrust Authorities and the approval of the cross-border merger, of RHI AG with its subsidiary RHI MAG NV in the Netherlands, by the RHI General Meeting.

South Africa: PPC has ‘substantially agreed’ the structure and how it intends to implement a new broad-based black economic empowerment (BBBEE) transaction. However, it is waiting for the release of the new mining charter before proceeding, according to the Star newspaper. PPC chief executive Darryll Castle has said that the cement producer’s proposed merger with Afrisam is ‘going on in the background’ and that it would have to assess the impact of the Afrisam transaction on the company's new BBBEE transaction.

India: LafargeHolcim’s subsidiaries ACC and Ambuja Cement have started exploring the options for a merger. The cement producers have initiated a study to assess the benefits of the move. A special committee of directors, of which the majority are independent directors, has been constituted to commence the evaluation. The boards of both companies will make a decision once a recommendation is received from the special committee of directors and the Audit Committee.

Germany: Loesche has merged its activities in the combustion systems and drying systems sector into a central location at their main centre under the name Loesche Thermal Applications. Alongside the established hot gas generators, the business incorporates combustion systems for solid, liquid and gaseous fuels as well as complete drying systems for a wide variety of industrial applications, including the cement industry.

By uniting the core competencies in the thermal applications sector, the Loesche group seeks to strengthen its market position. Pooling marketing, project management, purchasing, processing technology and proactive development together with an individual burner test facility at the in-house test centre are also intended to raise efficiency. The business reorganisation will also see the merger of Loesche with A Tec Greco Combustion Systems Europe, a subsidiary that is currently based in Austria.

South Africa: AfriSam is preparing to replace its chief executive officer (CEO) to aid its merger discussions with PPC. Rob Wessels, a former chief investment officer at AfriSam’s black empowerment partner Phembani Group, is set to replace current Stephan Olivier on a short-term contract, according to sources quoted by Boomberg. The personnel manoeuvring would also potentially place PPC’s current CEO Darryll Castle in a strong position to become the merged company’s new leader. PPC and AfriSam announced that they had resumed merger talks in February 2017 after a previous attempt stalled in 2015.

The merger between South Africa’s larger cement producers, PPC and AfriSam, is back on this week. PPC issued a statement advising its shareholders that the board of directors of both companies were about to enter formal talks to thrash out a potential deal. Issues such as the merger ratio, black economic empowerment and local competition concerns are all on the agenda.

The resumption of merger talks follows the cancellation of the previous round in mid-2015. No reason for the breakdown was publicly released but possible factors may have included the fallout at PPC from the resignation of its chief executive officer (CEO) Ketso Gordhan and competition concerns. Given the investigations by the South African Competition Commission from around 2008 to 2012 these may have been very real concerns. At this time the two companies held about a 60% share of the country’s cement production capacity.

Events have changed since then with the opening and ramp-up of Sephaku Cement’s cement plant at Aganang and its grinding plant at Delmas since late 2014. Today, PPC and AfriSam control just under 50% of the cement production capacity in South Africa and PPC’s current CEO Daryll Castle remains in post since early 2014. What a difference a year or so can make.

PPC moved its financial year end from September to March in 2016 making it hard to compare like with like. However, its revenue appears to have grown by 10% year-on-year to US$396m for the six months to 30 September 2016. Its earnings before interest, taxation, depreciation and amortisation (EBITDA), a measure of operating performance, fell by 7.5% to US$80m at the same time. Since then PPC notified markets with a trading statement saying that its sales volumes in South Africa had risen by 4% in the nine months to the end of December 2016 but that its prices had fallen by 4%. It also noted that its local cement sales volumes declined marginally when compared to the same quarter in the previous year, with the exception of the Western Cape region.

PPC also has various projects underway in sub-Saharan Africa, including plant builds in Democratic Republic of Congo (DRC) and Ethiopia. Of note to any potential merger with AfriSam are its plans to build a new 3000t/day production line at its Slurry plant in Lichtenburg. The project was reported 54% complete in early February 2017 with first clinker production scheduled for the first half of 2018. CBMI Construction, a subsidiary of China’s Sinoma, is the main contractor for the upgrade project. Once complete the new line will add about 1Mt/yr to the plant’s cement production capacity. One implication of this project is that it will push PPC and AfriSam’s market share over 50% that may have consequences with the local competition body.

For its part AfriSam appears to be suffering financial problems according to local press. The Public Investment Corporation (PIC), a government investment body, revealed in late 2016 that it had invested over US$100m in the cement producer since 2008. The PIC holds a controlling share of AfriSam with a 66% stake in the group. Other than this, solid facts about the state of AfriSam’s business are thin on the ground. However, competition in South Africa’s cement sector has certainly increased in recent years both within and without, from the import market.

As this column has said a few times merger and acquisitions seem to be the way to go for cement producers in weak markets. However, as annual results from Cementir and HeidelbergCement show this week, the initial boost from new asset and business purchases may not be so rosy when viewed in a pro-forma basis or when taking into account new units’ past performance. A lot here rides on these companies being able to take advantage of synergy effects and to make crucial savings. The big example of this in the global cement sector is LafargeHolcim. It will announce its financial results for 2016 on 2 March 2017. It also operates a cement plant in South Africa and the results may have implications for the PPC and AfriSam merger.

In other news, the European Union parliament has voted today, on 15 February 2017, to amend its Emissions Trading Scheme (ETS) in line with a proposal made by the European Commission. This is unlikely to impress the environmental lobby or users of secondary cementitious materials in cement production, amongst other parties. More on this topic next week.