National Cement jumps up the ladder with ARM buyout

Devki Group are in line to become the second largest cement maker in Kenya. [Standard]

Devki Group are in line to become the second largest cement maker in Kenya after they acquired the assets of Athi River Mining for Sh5 billion.

The maker of Simba brand under National Cement subsidiary recently acquired Cemtech which holds limestone and clay deposits, and the requisite licences, in West Pokot County.

Limestone and clay are the key input in clinker production.

Kenya National Bureau of Statistics put Bamburi’s market share at 33 per cent followed by Mombasa Cement at 16 per cent, East African Portland  Cement Company at 15 per cent and Savannah Cement 15 per cent as at December 2018.

National Cement was at eight per cent while Athi River Mining Africa was at 13 per cent.

According other statistics by research firm GfK Global, Bamburi had 33 per cent in market share, while Mombasa and National Cement gained to close 20.3 per cent and 19.3 per cent respectively by February 2018.

ARM had a market share of 5.5 per cent at the time.

“This transaction is in line with National Cement’s growth strategy in Kenya to position itself as the leading cement manufacturer in the region. The industry is poised for growth and we are excited about the prospects for this next chapter of our business,” said National Cement Chairman Narendra Raval.

In 2015, Nigerian business magnate Aliko Dangote approached Mr Raval with a proposal to acquire part of the Devki empire as a means of accessing the East African market, an offer which the latter turned down.

ARM Cement was put under administration in August 2018 by some of its creditors over a Sh19 billion debt.

Its shares were suspended from the Nairobi bourse while trading at Sh5.55, which put the company’s market worth at Sh5.3 billion.

In October 2018, the creditors approved a proposal by the joint administrators to identify strategic or financial investor(s) in ARM with a view to achieving either a recapitalisation of the company through an injection of equity or a sale of all or some of its assets.

The administrators would also help restructure its debt obligations.

The sale to Devki however represents a smaller portion of the business with the bulk of the investment in Tanzania still under negotiations.

Investors placed bids for part or the whole business and receiver managers seem to have preferred splitting the firm to gain the highest value.

Tanzanians are said to be keen on the developments in Kenya hoping that with a resolution, the firm can be cross-listed and open up an opportunity to own a stake in the company.

“The signing of this transaction marks an important moment 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 the jobs of its employees through a going concern sale,” said George Weru, one of the administrator for ARM Cement.

ARM also has operations in Rwanda as well as some interests, in the form of unexploited mineral deposits, in South Africa.