An associate of tycoon Jaswant Rai has renewed a court fight to buy troubled cement maker Athi River Mining (ARM) after he filed of an appeal seeking to block the purchase of the firm by businessman Narendra Raval of National Cement.
Pradeep Paunrana, the Former ARM Cement chief executive and owner, has filed the appeal and wants the court to consider a bid from a consortium that includes Mr Rai.
Through the 2,000 page appeal, Mr Paunrana has faulted a High Court judgment issued two weeks ago that lifted the freeze on the sale of ARM.
In effect, the ruling paved the way for National Cement to acquire ARM Cement for Sh5 billion.
The High Court had in late September given Mr Raval the greenlight to acquire ARM, Kenya’s second biggest cement maker, raising doubts that a second consortium including Mr Rai and and Mr Paunrana could raise their Sh6.5 billion offer.
Mr Paunrana had sued to block the sale of of the cement firm through an auction after banks placed it under administration.
He argued that the banks had ignored his offer of Sh6.5 billion, which was Sh1.5 billion more than the National Cement offer.
He now wants the Court of Appeal to halt the sale pending the appeal, arguing that National Cement executives have already moved into ARM Cement premises.
“The sale of ARM Cement to National Cement would occasion irreparable loss and damage to the applicant,” said Mr Paunrana’s lawyers.
“The respondents are already proceeding to irregularly hand over management of ARM to NCC, who are directing aspects of the management and issuing orders to staff.”
The High Court cleared the sale of ARM to National Cement, arguing that Mr Rai was not part of the court process challenging the sale and his late inclusion in the Sh6.5 billion offer had introduced ‘hidden’ clauses the court was not privy to.
The court had put the sale of ARM on hold pending the tabling of a 20 percent guarantee of the Sh6.5 billion offer by Mr Paunrana by September 10.
PricewaterhouseCoopers (PwC), which is acting as ARM administrator, did not accept the guarantee amounting to Sh1.3 billion, arguing that it was presented on the strength of Mr Rai whom the consultancy firm considered a stranger in the bidding process.
The High Court judge agreed with PwC, paving the way for the distressed ARM Cement to be bought by National Cement.
ARM, which was once the second biggest cement maker in Kenya behind Bamburi Cement, was put under administration last August by some of its creditors over debts totalling Sh19 billion. Its shares were then suspended from trading at the Nairobi Securities Exchange.
The Court of Appeal fight reflects Mr Rai’s bid for a larger stake of Kenya’s cement business after he established a smaller cement plant in Awasi, Kisumu County.
The case also shows the reluctance by Mr Paunrana to give up ARM Cement, a company that he inherited from his father -- Harjivandas Paunrana. The family’s stake was at one time valued a nearly Sh10 billion.
Muniu Thoithi, one of the two administrators of the factory, said in a sworn affidavit that Mr Paunrana had failed to meet the April 4 deadline to put in a bid after expressing interest in the asset auction. He submitted a late bid on May 17 under a consortium with Mr Rai.
Mr Thoithi says that the Sh6.5 billion offer, which was submitted just one hour before the administrators signed a deal with National Cement, lacked proof of funding as it had only an expression of interest from Baraka Fund — which promised to finance the bid.
The offer was also not binding because the financier still needed to do due diligence, a process that had been concluded between October 2018 and March 2019.
Further he claimed that Mr Paunrana had indicated earlier that his family did not have money to participate in the transaction.
Rai Group had earlier shown interest in ARM Cement ahead of bidding, but never placed an offer.
The Paunrana family had indicated a joint bid with Mr Aliko Dangote — Africa’s richest man — which never materialised. Mr Dangote later put in his own bid of Sh4.5 billion but lost to Nairobi Cement.