On Thursday, ARM Cement Plc concluded a deal in Tanzania to sell Maweni Limestone Ltd to Chinese firm Huaxin Cement at a cost of $116 million.
At the same time, the High Court in Nairobi dismissed a case filed stopping the sale of the Kenyan operation to National Cement Company paving the way for the conclusion of the transaction valued at $50 million.
For Mr Pradeep Paunrana, the sale of the Tanzanian subsidiary is the final nail on the coffin of his prized family holding, considering that Tanzania was supposed to be ARM’s launching pad in its quest to dethrone France’s Lafarge Group from East Africa’s cement market in 2012.
Pradeep Paunrana, Athi River Mining Cement Plc ex-chief executive and major shareholder has lost the Tanzania subsidiary and a case in Kenya seeking to stop the Kenyan operation from being sold.
On Thursday, ARM Cement Plc concluded a deal in Tanzania to sell Maweni Limestone Ltd to Chinese firm Huaxin Cement at a cost of $116 million.
At the same time, the High Court in Nairobi dismissed a case he filed stopping the sale of the Kenyan operation to National Cement Company paving the way for the conclusion of the transaction valued at $50 million.
On the sale of Maweni, joint administrator for ARM Cement George Weru said in a statement: “Signing of this transaction marks a crucial step for the delivery of our mandate as joint administrators of ARM Cement to realise value for the creditors, ensure continuity for the business and its suppliers and in the process safeguard jobs of its employees through a going concern sale.”
Mr Weru also said that the sale of the Kenyan subsidiary is now only awaiting regulatory approvals following the High Court ruling.
“The closure of the transaction is dependent on when we receive the pending regulatory approvals including the Competition Authority merger determination,” he told The EastAfrican.
Mr Paunrana has been waging court battles to stop the sale of the once giant cement manufacturer with operations in Kenya, Uganda and Rwanda.
Acquisition agreement
ARM administrators PwC announced Huaxin had signed an agreement for the acquisition of 100 per cent of the shares of Maweni Limestone, a wholly-owned subsidiary of ARM Cement.
The transaction is subject to certain conditions precedent including receipt of requisite regulatory approvals. Huaxin is among the top 10 cement companies in the world in terms of capacity and revenues.
For Mr Paunrana, the sale of the Tanzanian subsidiary is the final nail on the coffin of his prized family holding, considering that Tanzania was supposed to be ARM’s launching pad in its quest to dethrone France’s Lafarge Group from East Africa’s cement market in 2012.
It was this unbridled ambition which informed the decision by ARM to turn to commercial banks, and borrowed a staggering $300 million to invest in cement and clinker plants with a capacity of 1.2 million tonnes annually.
The decision to finance the Tanzanian venture through short-term debt has come back to haunt ARM.
In Kenya, the case with National Cement, a subsidiary of Devki Group, a family-owned conglomerate with interests in cement, steel products, roofing sheets and aviation, has also been a painful one.
The court ruling this week by Justice Mary Kasango sitting in Nairobi dismissed the application filed by Mr Paunrana in July to stop the sale of the company on the basis that it was “misconceived and without merit.”
The development is not just a big blow to Mr Paunrana but also to tycoon Jaswant Rai of Rai Cement, a company that was also interested in acquiring ARM and which provided the financial backing to stop the sale.
The court battle pitting Mr Paunrana and Rai against industrialist Narendra Raval had stalled the sale of ARM Cement past the expiry of receivership, having been placed in administration on August 2018 over debts amounting to $190 million.
Mr Raval is the main shareholder of Devki Group that entered into an agreement to acquire ARM in May. With the backing of Rai, Mr Paunrana halted the transaction on condition that he provides a guarantee equivalent to 20 per cent of the Ksh6.5 billion ($61.8m) bid price.
However, the court granted the administrators the liberty to determine whether the bank guarantee met their requirements for the sale of the Kenyan operation.
Although Mr Paunrana has a window to appeal, the ruling ultimately brings to a conclusion the battle for ARM Kenya that attracted interests from some 25 foreign and domestic companies, 23 of which had signed non-disclosure agreements.
