Nigeria bank joins Athi River Mining board, eyes 13.6pc stake
Posted Wednesday, July 25 2012 at 20:27
Athi River Mining (ARM) has offered a board seat to a Nigerian-based lender, a signal that the West African bank is keen to convert a loan it extended to the cement firm into equity.
The Africa Finance Corporation (AFC) committed to advance $50 million (Sh4.2 billion) loan to ARM and has the option to convert the debt into a stake equivalent to 13.6 per cent of the cement firm.
Now, Andrew Alli — the chief executive officer of AFC — has become the eighth director of ARM, a board position that has led analysts to believe that the financier is keen on developing strategy for the cement manufacturer ahead of its acquiring a stake.
“We look forward to AFC increasing the capacity of the board, and your company’s corporate leadership,” said ARM’s Chairman Rick Ashley in its latest annual report.
The $50 million notes may be convertible any time during a six-year period — at the option of the investor — at a fixed price of $ 3.20 per share (Sh268), which could result in 15,625,000 new ordinary shares.
“This will translate to 13.62 per cent of the total equity of the company on conversion of the loan notes,” ARM’S Managing Director Pradeep Paunrana said earlier.
The firm’s share has risen 31 per cent in the past six months to Sh200.
ARM, which also makes fertiliser, lime and sodium silicate, says proceeds from the issue of the convertible note will be used to complete ongoing projects and invested in a further one million tonnes per annum clinker and cement capacity.
ARM currently produces about one million tonnes per annum of cement in Kenya and is building a new plant in Tanzania to add 1.5 million tonnes a year cement capacity.
AFC is a development finance institution established in 2007 and based in Lagos, Nigeria. It looks at developing or financing infrastructure projects.
Should AFC convert the debt into equity, it will join the Paunrana family as a strategic investor in ARM, a position that has been empty since the exit of rival Bamburi Cement in 2010. Bamburi had a 14 per cent stake in 2008 and got the ownership after converting a loan it gave ARM.
The Paunrana family collectively owns 45 per cent of the firm, which includes an 18 per cent ownership by ARM’s managing director.
The company’s net profit stood at Sh550 million in the six months to June, compared to Sh441 million in a similar period a year before as sales rose 37 per cent to Sh5 billion.