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ARM Cement suitors have one month to submit bids

ARM Kaloleni Cement plant
ARM Kaloleni Cement plant in Mombasa County. The firm is expected to be sold in an auction that is already under way. FILE PHOTO | NMG 

ARM Cement #ticker:ARM will be seeking to turn a corner this year after a tumultuous 2018 that saw the company placed under administration.

The Nairobi Securities Exchange-listed firm is expected to be sold to the highest bidder in an auction that is already under way.

ARM’s administrators PricewaterhouseCoopers (PwC) have received several initial bids including from Nigeria’s Dangote Cement and Oman’s Raysut –which placed a Sh10.2 billion offer to acquire the debt-laden company.

According to the transaction timetable, binding offers are expected by the end of this month. ARM’s creditors will thereafter review the terms of the best offer, negotiate with the investor and complete the transaction.

It is not clear what stake the current ARM shareholders will be left with after the buyout is completed. What impact the transaction will have on an earlier move to sell the company’s non-cement business for Sh1.6 billion to Swiss firm Omya and ARM’s former chief executive Pradeep Paunrana is also unknown. PwC declined to comment on these issues.

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“Taking into account the confidentiality obligations that we have with various bidders, and the commercially sensitive nature of the bidding information we will not be in a position to provide the specific details requested,” the administrators said.

“At this stage all you should note is that the administrators are exploring a range of options with respect to ARM Cement in order to deliver a transaction that achieves the objectives of all stakeholders. We will engage relevant stakeholders in due course as the process continues.”

ARM remains suspended from trading on the Nairobi bourse where its stock last changed hands at a price of Sh5.5 or a market capitalisation of Sh5.3 billion.

Raysut’s Sh10.2 billion offer –the only bid announced publicly— is enough to fully compensate secured creditors who are owed a total of Sh7.2 billion.

Unsecured creditors, who are claiming Sh6.7 billion, risk taking a significant haircut should the company be sold at the price proposed by Raysut.

Shareholders like UK sovereign wealth fund CDC Group and Mr Paunrana, on the other hand, are staring at major losses as little cash is likely to spill over to them.

The interest in ARM comes after the administrators established that the company has a negative equity of Sh2.4 billion, meaning that current shareholders will suffer a major dilution if a takeover deal is concluded.

PwC says the top priority is to keep ARM operational for the benefit of various stakeholders including employees and lenders which it owes some Sh14 billion.

The acquisition of ARM will give the successful bidder an instant presence in the local and regional cement market, with a need to spend more than Sh2 billion to upgrade the company’s factories.

ARM’s operations in Kenya include a clinker and cement grinding plant in Kaloleni and a cement grinding plant at Athi River.

The company also manufactures, imports and sells cement in Rwanda through its wholly owned subsidiary Kigali Cement Company.

In Tanzania, ARM runs limestone, clinker and cement plants through its subsidiaries Maweni Limestone Limited and ARM Tanzania.

Raysut says the cement manufacturer will fit well into its existing trading with East African countries. The Omani firm already supplies about 300,000 tonnes of clinker to Kenya and Tanzania alone in one quarter from its home plant at Salalah.

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