Bamburi Cement is in line for an additional payout on top of the $84 million (Sh12.86 billion) consideration from its sale of a 70 percent stake in Uganda’s Hima Cement based on the financial performance of the subsidiary post the close of the transaction.
The Nairobi Securities Exchange-listed cement maker told its shareholders in a circular that the top-up payment—known as an Earn-Out Amount—will be triggered if Hima’s earnings before interest, taxes, depreciation, and amortisation (Ebitda) for the 2023 financial year equal or exceed Sh3.13 billion.
The details of how to calculate the Ebitda, as well as the size of the Earn Out Amount, are set out in the share purchase agreement, which is yet to be made public by the firm.
Bamburi and its sister company Cementia Holding AG are selling their entire ownership in Hima to a consortium of Sarrai Group and Rwimi Holdings for $120 million (Sh18.4 billion). From the proceeds, Bamburi is entitled to a 70 percent share, while Cementia will bank 30 percent.
“In addition to the consideration, the purchasers shall pay to Himcem and Cementia the Earn Out Amount, if the consolidated Ebitda of Huma (based on its audited financial statements for the year 2023) is equal to or exceeds Ush77.96 billion (Sh3.13 billion),” said Bamburi in the circular.
“The purchasers shall pay out the Earn Out Amount shortly upon Himcem and Cementia providing the purchasers with their calculation of the Ebitda.”
Companies involved in asset sales normally utilise the Earn Out option if there is a gap between the price the seller is demanding and what the buyer is willing to pay. The option thus bridges the differing expectations between the parties.
The Bamburi consideration will also be affected by other adjustments related to Hima’s debt, cash holdings and working capital levels.
The consideration amount will be netted off Hima’s debt at the time of completion and added to any cash held by the subsidiary at the time.
Bamburi will also get to keep Hima’s working capital which is in excess of Ush48 billion (Sh1.93 billion), but if the Ugandan firm’s working capital is below this amount, the difference will be deducted from the consideration.
Bamburi has signalled to shareholders that it expects to pay a special dividend from the proceeds of the sale, meaning that any extra consideration under the special terms could directly boost the return to its shareholders.
