The Competition Authority of Kenya (CAK) has dismissed concerns that Tanzanian tycoon Edhah Abdallah Munif’s acquisition of an extra 29.2 percent stake in East Africa Portland Cement (EAPC) will give him control over the company’s board and a dominant position in the cement sector.
CAK Director General David Kemei told the National Assembly’s Committee on Trade, Industry and Co-operatives that the proposed deal will not hand the businessman control or veto powers in the EAPC board.
Mr Munif is buying 26.32 million Portland shares from Swiss multinational Holcim using an investment firm known as Kalahari Cement Limited at Sh27.30 each, valuing the deal at Sh718.7 million.
If the transaction goes through, he will emerge as the single largest shareholder of the NSE-listed company with a 41.75 percent stake, given that his wholly owned Bamburi Cement already owns 12.5 percent of EAPC.
Some members of the committee queried whether the additional stake would give the businessman dominance over EAPC’s voting rights and strategic direction, while also raising issues with the valuation of the deal.
The CAK said that in order for one party in a deal to be deemed to have gained control, they would need to acquire over 50 percent of the entity’s issued shares, have the majority votes cast at a general meeting, and acquire powers to veto key decisions.
“In this transaction, no party is expected to gain dominance over the other, since there is no acquisition of control over the target undertaking at the onset,” said the CAK in the submissions.
The CAK’s assessment of the deal was also triggered by a request for an advisory opinion by Kalahari and Holcim on whether the deal needed to be notified to the competition regulator.
Given the verdict that the deal would not lead to a change in control, the CAK concluded that no notification is required before implementation.
On the EAPC board, Kalahari will share the role of appointing directors with the National Social Security Fund (NSSF) and the National Treasury, which hold stakes of 27 percent and 25 percent, respectively.
Previously, Holcim enjoyed similar privileges courtesy of its direct holding of 29.1 percent and indirect stake through Bamburi’s 12.5 percent holding in its fellow listed cement maker, which yielded an effective stake of about 36.4 percent.
With his stakes in Bamburi and EAPC, Mr Munif will have board-level presence in firms controlling a combined cement processing capacity of 4.5 million tonnes per annum (mtpa) in Kenya.
An independent advisory report prepared by Standard Investment Bank (SIB) in October 2024, ahead of the Bamburi takeover by Mr Munif’s Amsons Group, showed that Mombasa Cement was the market leader with a production capacity of 3.9 mtpa (26.9 percent) ahead of National Cement/Simba at 3.6 mtpa (24.8 percent).
Bamburi was third with a capacity of 3.2 mtpa or 22 percent of the total installed capacity, followed by Savannah Cement at 1.5 mtpa (10.3 percent) and EAPC at 1.3 mtpa (8.96 percent). Other players were Rai Cement with a share of 4.83 percent, and Ndovu at 2.06 percent.
The CAK noted, however, that none of the cement firms in Kenya has met the threshold of a dominant player based on these market shares.
“If a company has a market share of less than 40 percent, it is unlikely to be dominant,” said the CAK in its submission.
It is, however, conducting a cement market study to understand the sector’s market structure, concentration, and the overall market dynamics, relying on historical price, production, and demand data trends.
Additionally, the study will establish whether there is the presence of cartel conduct in the market and the impact of buyer power on small and medium-sized enterprises in the cement value chain.
It will also assess contractual practices between cement manufacturers and distributors and retailers, and whether these may amount to exploitative conduct.
