ARM eyes cement deals in Africa with cash-rich investor
What you need to know:
ARM, which also makes fertiliser, lime and sodium silicate, said proceeds from the issue of the convertible note would be used to complete ongoing projects and invested in a further one million tonnes per annum clinker and cement capacity.
ARM produces about one million tonnes of cement annually in Kenya and is building a new plant in Tanzania to add 1.5 million tonnes a year.
AFC is a development finance institution established in 2007 and based in Lagos, Nigeria. It looks at developing or financing infrastructure projects.
Its partnership with ARM comes at a moment when the cement maker is looking to tap the growing consumption of cement in the continent spurred by the booming real estate and rising infrastructure spends by governments.
Cement maker ARM is looking for deals in news markets across Africa as an outlet to deploy cash and strategies it will receive from a Nigeria-based lender it has offered a board seat.
Cement maker is seeking to spread its reach across the continent and will be keen to close joint venture and acquisition deals, especially in West Africa where it lacks a presence, said deputy managing director Surendra Bhatia.
“Having AFC (Africa Finance Corporation) on our board is a strategic decision that will help us in entering the new markets where it is already established, especially in the West Africa region,” said Mr Bhatia. “AFC will help us expand either through a green field, joint venture or acquisition across Africa because they have the money and will also be in the next strategic plan running from 2016 to 2020.”
ARM has appointed Andrew Alli, the chief executive officer of AFC, to its board and analysts said that the financier is keen on developing strategy for the cement manufacturer ahead of its acquiring a stake.
The Nigerian based lender last month advanced $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 within six years.
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 a share (Sh268), which could result in 15,625,000 new ordinary shares.
ARM, which also makes fertiliser, lime and sodium silicate, said proceeds from the issue of the convertible note would be used to complete ongoing projects and invested in a further one million tonnes per annum clinker and cement capacity.
ARM produces about one million tonnes of cement annually in Kenya and is building a new plant in Tanzania to add 1.5 million tonnes a year.
AFC is a development finance institution established in 2007 and based in Lagos, Nigeria. It looks at developing or financing infrastructure projects.
Its partnership with ARM comes at a moment when the cement maker is looking to tap the growing consumption of cement in the continent spurred by the booming real estate and rising infrastructure spends by governments.
This is the reason ARM is mulling over the possibility of listing its non-cement business that is dominated by fertiliser production as a separate entity. It says this will help it to focus on increasing cement sales.
The company had a target of getting more than half its revenue from outside Kenya by 2015 compared with about 25 per cent at the moment.
Earlier, ARM said it was in talks with private equity companies on providing $20-25 million for a 30-50 per cent stake in the fertiliser subsidiary, which would then be listed separately in three to five years.
Should AFC convert the debt into equity, it will join the Paunrana family as a strategic investor in 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 firm said Monday its net profit stood Sh826 million compared to Sh192 million in the same period last year, helped by a foreign exchange gain of Sh42 million compared to a loss of Sh681 million last year on its dollar dominated borrowing.
