The International Finance Corporation (IFC) and KCB Group #ticker:KCB are financing part of National Cement’s Sh5 billion bid for ARM Cement’s #ticker:ARM Kenyan operations.
National Cement, which is buying ARM out of bankruptcy, has lined up a mix of debt and its own funds to fund the transaction.
“We can fund half the deal (Sh2.5 billion) from our own cash flows. The balance we will get from IFC and KCB,” Narendra Raval, the chairman and major shareholder of National Cement, told the Business Daily.
IFC and KCB have been funding National Cement for years, with their commitment enabling the company to win the ARM auction.
George Weru, an executive with PwC and one of the administrators of ARM Cement, told the Business Daily that deal certainty including proof of funds was one of the reasons National Cement’s bid was successful.
Unlike others, National Cement also did not attach onerous terms and conditions in its bid.
“Having looked at these criteria, we concluded that the offer from National Cement presented the best outcome for creditors,” Mr Weru said.
Most rival bidders had sought to buy ARM’s Kenyan operations at a range of between Sh3 billion and Sh4 billion.
Among the multinationals whose bids were unsuccessful were Nigeria’s Dangote Cement and Oman’s Raysut.
National Cement’s managing director Kaushik Pandit said in an interview that the company will invest Sh2 billion to improve ARM’s operations over the medium term.
A substantial part of the new investment will go into upgrading ARM’s plant and equipment, ultimately enhancing productivity and efficiencies.
Mr Kaushik said the acquisition will raise National Cement’s annual production to 1.4 million tonnes and boost its market share to 13 percent from the current eight percent.
Sale of ARM’s Kenyan business leaves the administrators to focus on Tanzania — the largest subsidiary which is expected to fetch a higher price than the local unit.
Mr Raval said National Cement is not interested in Tanzania, saying Kenya is a more attractive market.
“We are making this deal to expand our market and especially to get a presence in Mombasa,” Mr Raval said.
Sale of Tanzania business could be completed in one to two months, Mr Weru said.
Bids have already been made for the business in that market.