AfriSam makes a revised proposal to PPC regarding the Merger and Fairfax makes a partial offer to PPC shareholders.


AfriSam Group (Pty) Ltd (“AfriSam”) has submitted revised offer to merge with PPC Ltd (“PPC”) with support from Fairfax Africa Investments Proprietary Limited (“Fairfax Africa”).

Fairfax Africa has submitted to the board of directors of PPC a Firm Intention offer to acquire shares of PPC representing a value of R2bn for cash consideration of R5.75 per ordinary share.

Fairfax to recapitalise AfriSam with R4bn which will settle almost all of the company’s third party debt

The cash offer to PPC Ltd shareholders represents a cash premium of 28% over the 30-day weighted average traded price of PPC’s shares on the Johannesburg Stock Exchange as of August 30, 2017.

The proposed merger ratio is based on a share exchange of 58 (PPC) : 42 (AfriSam) and represents a 62% premium for PPC on a P/E multiple basis.

4 September 2017 –AfriSam Group (Pty) Ltd (AfriSam) is pleased to announce that it submitted a revised merger proposal to PPC Limited (PPC) and that Fairfax Africa Investments Proprietary Limited (Fairfax) has made a Partial Offer to acquire ordinary shares in PPC representing a value of R2 billion held by PPC shareholders.

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 R4 billion investment committed to AfriSam and R2 billion Partial Offer to PPC shareholders.  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”, says Rob Wessels, acting CEO of AfriSam. 

“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 DRC, and, over time, will become a preeminent and leading African player in cement”, comments Wessels.

“The merged entity will be a highly black empowered company with the benefit of a financially sound balance sheet that will enable the company to take advantage of opportunities in South Africa and the rest of the continent. The merger between AfriSam and PPC is probably the tonic the two companies need at this moment as they are both facing stiff competition from cheap imports and rising costs which can be overcome with synergies to be derived from a merged entity,” says Kennedy Bungane, CEO of Phembani Group.

“Phembani has a history of growing businesses in South Africa and we believe that our continued involvement will create ample value for shareholders going into the future. Fairfax Africa has its own track record, therefore the combination could only be good for shareholders,” says Bungane.

Michael Wilkerson, CEO of Fairfax Africa said “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.    We expect that the combined company will be able to achieve substantial cost savings from route-to-market efficiencies and G&A rationalisation, while maintaining or growing employment and transformation in South Africa.  These cost savings and efficiencies should benefit customers and consumers over the long-run”.

Prem Watsa, Chairman and CEO of Fairfax Financial Holdings Limited said, “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.”

Consummation of the Merger is conditional upon: (i) finalization of the merger agreement and related documentation between PPC and AfriSam, (ii) the shareholders of PPC approving the Merger, (iii) the recapitalisation of AfriSam, including (a) the conversion of R3 billion (approximately US$231 million) of PIK Notes held by the PIC and Phembani into ordinary shares representing 40% of AfriSam’s equity capital and voting rights and (b) the completion of the R4 billion AfriSam Investment, proceeds of which would be used to reduce third-party debt of AfriSam immediately prior to consummation of the Merger (the “Recapitalisation”),  (iv) receipt of certain approvals from relevant regulatory authorities, and (v) other customary closing conditions.

Further details of the Merger and the Partial Offer are contained in the firm intention announcement released by PPC on 4 September 2017.


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About AfriSam

AfriSam was founded in 1934 and has since grown to be the leading black-controlled construction materials group in southern Africa.  With operations in South Africa, Lesotho, Swaziland and Tanzania, the company has the capacity to produce in excess of 5.5 million tons of cement, 10 million tons of aggregate and 4 million cubic meters of readymix concrete annually.  AfriSam is South Africa’s largest producer of aggregate and the second largest producer of cement and readymix concrete.  Combined this makes AfriSam, the largest supplier of concrete material in southern Africa.  AfriSam’s key shareholders are the Public Investment Corporation (PIC) and Phembani Group, with Fairfax Africa soon to resume a major holding on conclusion of the equity injection transaction. 

About Fairfax Africa

Fairfax Africa Holdings Corporation (TSX: FAH.U, “Fairfax Africa”) is an investment holding company whose objective is to achieve long-term capital appreciation, while preserving capital, by investing in public and private equity securities and debt instruments of African businesses or other businesses with customers, suppliers or business primarily conducted in, or dependent on, Africa.

About the Public Investment Corporation (PIC)

Established in 1911, the Public Investment Corporation (PIC) Limited is one of the largest investment managers in Africa today, managing assets of over R1,6 trillion and still growing.  The PIC, a registered financial services provider, is wholly owned by the South African Government, with the Minister of Finance as shareholder representative. It invests funds on behalf of public sector entities, based on investment mandates set by each of these clients and approved by the Financial Services Board (FSB).

About Phembani Group

Phembani Group (Pty) Ltd was founded in 1994 and is a Black-controlled pan-African group which holds investments, and the operating of, businesses and interests which fall within the oil, gas, minerals, mineral resources, metals and infrastructure related (including in respect of and / or in connection with construction, construction materials and / or the like) sectors in Africa. Phembani’s strategy is to seek out a limited number of larger investments where it will have the ability to meaningfully influence the strategy formulation and execution of that strategy in our investee companies