India’s largest cement manufacturer UltraTech Cement is in the race to acquire a controlling stake in Nairobi Securities Exchange-listed ARM Cement, in which it could buy convertible preference shares of up to $125 million (Sh12.7 billion).
ARM recently announced the impending transaction — expected to be complete by March— but did not reveal the identity of the potential investor.
UltraTech is said to be negotiating with ARM for the controlling stake in Kenya’s second-largest cement manufacturer after the French-owned Bamburi Cement.
ARM chief executive Pradeep Paunrana, however, declined to comment on the issue, or confirm that the company is in talks with the Indian giant.
“Such matters and information release are subject to regulatory compliance,” said Mr Paunrana.
UltraTech Cement is the largest producer of grey cement, ready mix concrete and white cement in India and is also one of the leading manufacturers of the commodities globally.
The conglomerate has an installed capacity of 67.7 million tonnes per annum of grey cement, with 12 integrated plants and 18 grinding units.
Its operations span India, UAE, Bahrain, Bangladesh and Sri Lanka and South Africa. The multinational made a net profit of Sh30.8 billion in the year ended March 2015 on gross revenues of Sh393.5 billion.
UltraTech’s potential entry in Kenya marks increased interest in the local highly competitive cement market that has seen the establishment of several new players over the past few years, including Savannah Cement.
Nigeria’s Dangote Cement has also announced plans to enter the local market in the near term, setting the stage for increased competition against established players like Bamburi Cement that is majority owned by LafargeHolcim.
For ARM, raising the funds from the intended sale of preference shares will ease the pressure of mounting debts that has weighed down its earnings.
The firm had planned to raise $105 million (Sh10.7 billion) from a five-year private bond to retire its expensive short term debts but shelved the plan, opting to sell preference shares to the strategic investor.