Kenya-based Chinese tile manufacturer Keda (Kenya) Ceramics Company Limited has received approval to acquire assets of a struggling competitor in a deal estimated at Sh1 million, extending its lead in the floor and wall tiles business.
The Competition Authority of Kenya (CAK) on Tuesday gave the greenlight to Keda, the market leader in Kenya’s floor and wall tiles business, to acquire Ramoda Ceramics Limited, which had the third highest market share in the tiles business before liquidity challenges forced it to shut down.
Sources familiar with the deal told this publication that Keda will pay Sh1 million. CAK said the deal will increase Keda’s market share from the current 25 percent to 31 percent.
In approving the deal, CAK noted that the transaction was unlikely to lead to a substantial lessening of competition in the market for ceramic tiles in Kenya, adding that the revival of Ramoda, which is part of Ramco Group, will create about 500 jobs.
“As per the parties’ submissions, the transaction is likely to positively impact employment following reopening of the Ramoda’s mothballed manufacturing plant. This will create approximately 500 direct job opportunities, significantly contributing to the local and national economy,” said CAK in the notice.
The purchase of Ramoda, which had a six percent market share, will widen the gap between Keda and its closest competitors. Keda’s closest rivals are Goodwill (15 percent) and SAJ Ceramics Limited (12 percent). Millennium and Modern have a two percent share each, leaving 38 percent in the hands of players who are mainly importers.
CAK said the deal is coming on the back of Ramoda having experienced liquidity challenges and other key business, strategic and operational weaknesses, resulting in the closure of its operations.
According to research by LimeGroup Consulting Africa, Kenya's annual demand for ceramic tiles is approximately 28.8 million square metres, with an average annual growth rate of eight percent.
CAK noted that the floor and wall tiles market has experienced significant growth in recent years and this trend is expected to continue in the future. The watchdog said the growth is fuelled by the country's rapid urban development and the booming construction industry.
According to the Kenya Association of Manufacturers (KAM), Kenya produces about 12.4 million square metres in ceramic tiles annually, translating to about 43 percent of what LimeGroup indicates as the country’s annual demand.
The shortfall between demand and the local production has necessitated imports to fill the gap as construction activities rise in the country. New homes as well as renovations on existing houses is also driving the market growth.
