The sale of Kenyan operations of ARM Cement has been stopped temporarily after the company’s former chief executive, Pradeep Paunrana, went to court challenging the transfer of the assets to rival firm National Cement.
Lawyers acting for Mr Paunrana, who is also a significant shareholder in the Nairobi Securities Exchange-listed firm, have filed the petition before the High Court.
PricewaterhouseCoopers (PwC) executives Muniu Thoithi and George Weru, who are the administrators of ARM Cement, are the respondents in the court case.
"That in the meantime as the respondents carry out their mandate under the administration order, they shall not execute/complete sale documents and/or transfer, sell the shares/assets of the company until hearing and determination of the instant application," the judge ordered.
The court will give further directions on Thursday next week. PwC is also expected to respond to the accusations by Mr Paunrana’s lawyers that the Sh5 billion offered by National Cement undervalues ARM Cement.
A consortium led by Mr Paunrana had made a bid of Sh6.5 billion for the Kenyan assets of ARM, but PwC rejected the offer because it was not accompanied by proof of funds among other reasons.
Proof of funding
"The offer letter did not provide any concrete proof of funding and what was provided was simply a conditional "Expression of Interest" that did not provide comfort and deal certainty, a critical consideration for the bidding process," the administrators said in a letter dated May 29.
PwC also said that Mr Paunrana’s bid was received on May 17, more than a month after the April 5 deadline for submission of bids.
Mr Paunrana’s lawyers, O&M Advocates, have however argued that there is no reason why their client’s offer should have been rejected.
"The purported asset purchase agreement between the respondent and National Cement had not been signed by the time the aforesaid consortium offer had been received by the respondents and there is no credible justification for the acceptance by the respondents of the National Cement bid prior to execution of the agreement, which bid fell a whole $15 million below the consortium’s bid," Mr Paunrana’s lawyers argue.
National Cement is owned by billionaire industrialist Narendra Raval through his Devki Group of Companies.
ARM Cement, founded in 1974 by the late family patriarch Harjivandas J Paunrana, has been the flagship business of the Paunrana family.
The loss of the cement company marks a low moment for the family and particularly for Pradeep, who has been the CEO and face of the business for decades.
Besides the Kenyan assets, PwC is also selling ARM Cement’s plants and operations in other markets including Tanzania.
Shareholders of the cement firm are unlikely to receive any payout from the transactions whose proceeds will mainly go to settle claims by secured creditors.