Portland discards merger plans with Bamburi

Portland discards merger plans with Bamburi
Published: 30 November 2007

East African Portland Cement Company (EAPCC) is not interested in merging with rival Bamburi Cement to form a regional conglomerate, top company officials said.  
 
Instead the company is strengthening its production capacity to satisfy rising demand in both local and regional markets, Mr Benson Ndeta, the chairman of its board said.  
 
Mr Ndeta told shareholders that no merger talks were ongoing between EAPCC and Bamburi and, therefore, no major changes in the company’s shareholding structure is on the cards.  
 
French conglomerate,  Lafarge - a dominant player in the cement market with interests in Kenya, Uganda and Tanzania and a shareholder in EAPCC had proposed the merger five months ago.  
 
Lafarge is said to have tabled the proposal before the Capital Markets Authority (CMA) -the market regulator whose approval is required for any takeovers and acquisitions of publicly quoted companies.  
 
In August, Trade and Industry minister Mukhisa Kituyi said two proposals had been forwarded to the CMA regarding the merger of all three local cement manufacturers Portland, Bamburi and Athi River Mining.  
 
Dr Kituyi said his ministry had also received copies of the merger proposals but would not make a decision until the CMA makes its position clear.  
 
One of the proposals is to reduce  Lafarge’s stake in Portland to reduce the French conglomerate’s dominance in Kenya’s cement-making business.  Lafarge has a 41 per cent stake in East African Portland and a 17 per cent stake in  Athi River Mining Ltd.
 
The company has a controlling stake in Bamburi while in Uganda it has a controlling stake in Hima Cement Ltd. One of the major cement producers, Mbeya Cement Ltd in Tanzania is a subsidiary of the French firm. 
 
Dr Kituyi said the Government was considering restructuring the cement industry and that the reorganisation may include merging the leading cement companies to improve their competitiveness in cement production in East Africa. 
 
But EAPCC chairman told shareholders at an Annual General Meeting at the company’s Athi River plant yesterday that Portland was not in talks with Bamburi.  
 
"If there is a merger we will make it public but the board is not considering a merger with Bamburi," said Ndeta.  
 
On the position of the managing director, he said the company was reorganising its management and that starting Monday it will advertise the position of the MD which has been vacant since August last year following the resignation Zakayo ole Mapelu.  
 
Five senior managers at the  East African Portland Cement tendered their resignations the same month in solidarity with Mapelu.  
 
Mr Ndegwa Kagio has been acting managing director since August last year.  
 
Shareholder Alois Chami said Kagio had acted for too long and called on the company board to appoint a substantive Chief Executive Officer.  
 
"We have had issues with succession planning but on Monday we will advertise for the position of the managing director we hope to put the management in good order" said Ndeta.  
 
He said the company had doubled its production so as to meet demand in the east African region. The demand is spurred by heavy construction work in southern Sudan.  
 
EAPCC has commissioned a new plant that will increase Portland’s current annual cement production capacity from 720,000 metric tonnes to about 1.4 million metric tonnes. The new mill will churn out 80 tonnes of cement per hour.  
 
Ndeta said Portland failed to take up opportunity to supply cement to Sudan because of low production capacity which was brought about by capacity constraints.  
 
He told the shareholders that the company had won contracts to supply cement in Sudan early this year but that the contract collapsed for lack of adequate cement to send to Sudan.  
 
"We cannot sell what we don’t have. We are increasing our production capacity to take advantage of the demand in the Great Lakes region. We are expanding our milling capacity so as to avail additional capacity to the regional market." said Ndeta.  
 
He said that Portland decided to sell its cement locally because profit margin in the regional market was not appealing.