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Cement maker AfriSam has called its $700 million merger proposal with PPC “fair”, announcing that it has no intention of changing the offer. “AfriSam and Fairfax Africa believe that the partial offer and merger reflect the fair and relative value of PPC and AfriSam based on the unaffected market price, as of August 30 2017, for PPC shares and other valuation benchmarks,” AfriSam said in a statement.

Race to purchase PPC hots upThis statement was a response to PPC’s board saying the proposal “fundamentally undervalues” South Africa’s biggest cement producer and that it expects a higher offer. The all-share offer from AfriSam, in conjunction with a cash offer of R2 billion for a 23% stake from Canada’s Fairfax Africa Investments, values PPC shares at R5.75 but reports indicate that expectations of a higher bid, either from AfriSam or others have kept the share price above that level.

AfriSam’s proposed merger is based on a share exchange ratio that will see PPC owning 58% of the combined entity and AfriSam owning 42%. It also represents a 57% premium for PPC shareholders based on projected earnings of both cement producers. If PPC shareholders approve the merger and partial offer, Fairfax Africa will be the largest shareholder, with a stake of around 38% of the company.

However, PPC has said it has received a nonbinding “communication of interest” from Nigerian company Dangote Cement to buy the entire share capital of the company. In an interview with Bloomberg TV in New York, Aliko Dangote said his company was waiting for PPC to respond to the offer. “They can be part and parcel of the Dangote Cement story, where we’re going to be in 18 African countries,” Dangote said.

AfriSam’s bid is also a step in a pan-African expansion. This is the company’s third attempt in three years to merge with PPC and create a pan-African cement group with assets across six countries. A previous bid was abandoned in February.

“The market in South Africa needs consolidation. It’s the right thing for us to go in there and consolidate. The issue is that they are making a bit of a mistake. They are focusing on the highest bidder. They are focusing more on value rather than, ‘What does it have for us going forward?’” Dangote told Bloomberg.

Image credit: https://twitter.com/alikodangote

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