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How Bamburi got top price in Uganda

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A section of Bamburi cement factory in Mombasa. FILE PHOTO | NMG

Bamburi Cement and its co-investor Cementia Holding negotiated a premium price of more than $15 million (Sh2.3 billion) for Uganda-based Hima Cement which they are selling to Sarrai Group.

An independent valuation of Hima by consultancy firm RSM (Eastern Africa) estimated the business to be worth between $74 million (Sh11.3 billion) and $105 million (Sh16.1 billion).

The sellers, however, managed to negotiate a deal which will see them paid $120 million (Sh18.4 billion) on top of additional amounts that are tied to the future performance of Hima post-transaction.

Read: Bamburi Cement profit plunges 87pc to Sh181 million

“On November 23, 2023, the Independent Expert concluded its independent valuation and its report confirmed that the EV for 100 percent of the shareholding in Hima ranges from $74 million to $105 million,” reads a circular to Bamburi shareholders.

“Notably, the consideration is based on an enterprise value of $120 million, surpassing the independently assessed value. This affirms the consideration is not only favourable but also a testament to the excellent value we have realised from the transaction.”

The agreement between the parties took into consideration multiple factors such as Hima’s performance in the year ended December 2022 and estimated performance for the current year ending this month.

These considerations led to an enterprise value to gross earnings (before interest, tax, depreciation and amortization) in the range of six to eight times, according to the circular.

This was higher than recent transactions in the Middle East and Africa region (specifically in South Africa and Oman) which had multiples of five to six times gross earnings.

Bamburi will take 70 percent of the payouts from the Hima transaction while Cementia will receive 30 percent, reflecting their respective ownership in the Uganda-based cement manufacturer.

The Nairobi Securities Exchange-listed firm will receive a gross initial payout of $84 million but the amount is expected to drop significantly after deductions.

“The portion of the consideration, which is expected to be received by Himcem (Bamburi’s investment vehicle), after deducting costs and taxes is approximately $50 million (Sh7.6 billion),” the circular says.

Bamburi says that the proceeds of the sale can either be reinvested in the Kenyan unit or distributed to its shareholders as a special dividend, subject to capital allocation plans by its board and management.

Read: Bamburi hit with Sh1.2bn Uganda, Kenya tax claims

Bamburi’s share price has nearly doubled in the wake of the announcement of the sale of Hima from lows of Sh22.5 before the deal was announced, signalling investors’ expectations of positive returns from the transaction.

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