Troubled ARM Cement #ticker:ARM risks losing its 70 percent stake and Sh300 million cash in a South African subsidiary after its partners in that country moved to kick it out of the company.
The Nairobi Securities Exchange (NSE)-listed firm in 2010 invested Sh75 million to acquire the controlling stake in Mafeking Cement (Pty) Limited, a dormant company which owns mining rights to limestone reserves in North-West of South Africa.
ARM was to take the leading role in raising funds and investing in a plant that was to have a production capacity of one million tonnes of cement per annum but those plans never materialised.
PricewaterhouseCoopers (PwC), which is currently managing ARM under administration, is seeking to dispose of ARM’s stake in the subsidiary from which the cement manufacturer is also claiming Sh300 million.
The minority investors have, however, invoked provisions of Mafeking’s shareholders’ agreement and filed a court application in South Africa that, if successful, would see them buy out ARM for a nominal price of R1 (Sh7).
They say the placement of ARM under administration means it is unable to proceed with the cement plant, effectively defaulting on its obligations.
“Accordingly, as it is entitled to, the minority shareholders have launched an application in the High Court for, inter alia, the cancellation of Mafeking shareholders agreement dated October 1, 2009, the return of the 70 percent shareholding, cessation of any claims and the resignation of all ARM directors..,” lawyers of the shareholders wrote to NSE’s chief executive Geoffrey Odundo in an April 5, 2019 letter.
PwC had not responded to our queries by the time of going to press but it has taken legal steps to thwart the minority shareholders’ actions.