Ex-ARM boss given five days to raise Sh1.3b to save firm
By Kamau Muthoni
| Sep 6th 2019 | 3 min read
Founder of struggling Athi River Mining Cement Company (ARM) Pradeep Paunrana has been given five days to raise Sh1.3 billion to stop his company from sale.
The court ruled that Paurana must produce a bank guarantee of Sh1.3 billion to enjoy court orders freezing the sale until a case filed in court is heard and determined.
In a ruling that is a major score for Devki Group, which has shown interest in buying ARM, Paurana family business, the court yesterday decreed that the former Chief Executive Officer and founder of the business has to satisfy ARM administrators-Muniu Thoithi and George Weru of PricewaterhouseCoopers Limited-on the quality and validity of his guarantee or else he will see the humbling riches change hands to billionaire businessman Narendra Raval of Devki.
“The applicant shall provide to the administrators an irrevocable bank guarantee for 20 per cent of the Sh6.5 billion (Firm’s estimated valued) on or before September 10, 2019.
The administrators shall determine whether the bank guarantee of the applicant meets the requirement for sale of Kenyan assets of ARM Cement PLC,” Justice Mary Kasango ruled.
The judge’s latest order also extends to ARM’s subsidiaries in Rwanda and Tanzania, which can now be sold if Paurana fails to raise the Sh1.3 billion security.
Paunrana had moved to court claiming that the administrators had conducted the sale in a flawed process that was marred by illegalities and irregularities.
The court had initially stopped the sale.
It, however, emerged that the administration of the firm had been thrown into limbo as the UBA Bank, which is owed money has been using its money to finance the administrators.
The judge heard that although Paunrana had sought court orders, he had not availed or made a commitment to buy out the company and its assets.
Devki’s National Cement Company Limited (NCCL) had offered $50 million (Sh5 billion) to buy out the firm, which was founded in 1974 by the patriarch Harjivandas J Paunrana.
Justice Kasango observed that Paunrana had to march the conditions met by NCCL, something which now raises stakes on his end.
“I am of the firm view that there is a need for conditions to be set in extending the orders. The orders that commend itself to me is the one met by NCCL. The order issued on July 12 and extended to September 19, 2019, is hereby set aside,” ruled Justice Kasango.
ARM was put under administration last year in August after sinking in debts totalling Sh19.3 billion.
This saw the suspension of its shares in the Nairobi Securities Exchange.
Muniu Thoithi and George Weru of PricewaterhouseCoopers Ltd were appointed as joint administrators of the company with the objective of maintaining the company as a going concern or achieving a better outcome for the company’s creditors.
At the same time, the financial troubles faced by ARM opened competition on who would succeed in buying out the struggling cement processor.
From inception in 2010, National Cement, which has shown interest in ARM has reported strong growth and established itself as one of the leading producers of cement in Kenya. The company produces the “Simba Cement” brand.
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