The revised merger proposal includes a R4 billion recapitalisation of AfriSam by Fairfax Africa prior to the merger with PPC.
The proposed merger ratio is based on a share exchange of 58 (PPC): 42 (AfriSam), and PPC’s equity value at R5.75 per share.
The significant capital investment by Fairfax will settle almost all of AfriSam’s third-party debt and places the combined company in a strong financial position.
The merger values PPC at a significant 62% premium based on pro forma earnings multiples applied to the two businesses.
The investment in AfriSam is subject to the proposed merger becoming unconditional in all respects.
The offer is made at R5.75 per PPC share for total cash consideration of R2 billion.
The offer represents an attractive 28% premium to PPC’s 30-day volume weighted average share price as at 30 August 2017, and provides substantial liquidity for those PPC shareholders who wish to exit a portion of their position.
“We are excited that Fairfax Africa sees the investment potential in the combined company as evidenced by its investment of R4 billion committed to AfriSam, and R2 billion partial offer made to PPC shareholders,” says Afrisam acting CEO, Rob Wessels.
“Among other benefits, the investment by Fairfax Africa will greatly reduce the underlying debt of the merged entity which will have sufficient liquidity and capital to compete in its current markets and selectively target growth opportunities on the continent.
“We believe the combined company will be well positioned to capitalise on higher growth in Africa, building on the foundation already laid by the two companies in countries including Tanzania, Rwanda, Ethiopia, Zimbabwe and the Democratic Republic of Congo, and, over time, will become a preeminent and leading African player in cement”, continues Wessels.
“We are excited about this opportunity and we strongly support the underlying strategic rationale for the merger, including the potential to create a black empowered national champion for South Africa, that is better positioned to compete in a challenging market environment,” comments Fairfax Africa CEO, Michael Wilkerson.
“We expect that the combined company will be able to achieve substantial cost savings from route-to-market efficiency and G&A rationalisation, while maintaining or growing employment and transformation in South Africa. These cost savings and efficiency should benefit customers and consumers over the long-run”.
“We strongly believe in this transaction and are encouraged by the potential it represents to work with PPC and AfriSam over the long-term to create a leading pan-African player in cement production and distribution,” states chairman and CEO of Fairfax Financial Holdings, Prem Watsa.