Approval for AfriSam takeover, South Africa

Approval for AfriSam takeover, South Africa
Published: 21 December 2011

South Africa’s Competition Tribunal has given conditional approval for the Public Investment Corporation’s (PIC’s) takeover of empowered cement maker AfriSam, which is struggling under the burden of billions of rand of debt.

The tribunal’s approval follows a high court ruling on December 2 that allows the PIC, representing the Government Employees Pension Fund, to convert ZAR4.7bn in debt it holds in AfriSam into equity, becoming the majority shareholder.

But AfriSam shareholders, empowerment group Bunker Hills Investments and Swiss-based cement maker Holcim, earlier applied to block the court’s decision, saying their respective 37% and 15% joint-majority shareholdings would be diluted to “almost nothing”. They also opposed the merger at the Competition Tribunal, but have now been beaten on three fronts. Earlier this month, the Department of Mineral Resources also signalled its approval for the conversion.

“The PIC welcomes the Competition Tribunal’s judgment in favour of the Government Employees Pension Fund’s proposed merger with regard to AfriSam,” PIC CEO Elias Masilela said yesterday. “The PIC can confirm that it has now received all the necessary regulatory approvals it needs to proceed with the exercising of (the government pension fund’s) contractual rights.” He said these include the conversion of the corporation’s AfriSam preference shares into ordinary equity, and the calling for redemption of this debt from Bunker Hills and related parties.

The tribunal said the government pension fund yesterday accepted that as long as it controlled AfriSam, it would not have board representation in any other cement producer in SA.

In this regard, the fund has minority interests in entities that operate in markets related to AfriSam, including SA’s largest cement producer, Pretoria Portland Cement (PPC).

To this end, the Competition Tribunal also said the pension fund must retain the “Chinese walls” between the teams handling its investments in AfriSam and in PPC.

The PIC, which manages ZAR1trn in South African state pensions, will now be able to restructure AfriSam’s near-term debt of about EUR1bn, which threatens to bankrupt the company.

Source: Business Day