Athi River Mining Cement CEO Pradeep Paunrana at his Westlands office in Nairobi, during rosier times in 2013. FILE PHOTO | NMG
Pradeep Paunrana, Athi River Mining Cement Plc ex-chief
executive and major shareholder has lost the Tanzania subsidiary and a
case in Kenya seeking to stop the Kenyan operation from being sold.
On
Thursday, ARM Cement Plc concluded a deal in Tanzania to sell Maweni
Limestone Ltd to Chinese firm Huaxin Cement at a cost of $116 million.
At
the same time, the High Court in Nairobi dismissed a case he filed
stopping the sale of the Kenyan operation to National Cement Company
paving the way for the conclusion of the transaction valued at $50
million.
On the sale of Maweni, joint administrator for
ARM Cement George Weru said in a statement: “Signing of this
transaction marks a crucial step 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 jobs of its employees through a going concern sale.”
Mr
Weru also said that the sale of the Kenyan subsidiary is now only
awaiting regulatory approvals following the High Court ruling.
“The
closure of the transaction is dependent on when we receive the pending
regulatory approvals including the Competition Authority merger
determination,” he told The EastAfrican.
Mr Paunrana has been waging court battles to stop the sale of
the once giant cement manufacturer with operations in Kenya, Uganda and
Rwanda.
Acquisition agreement
ARM
administrators PwC announced Huaxin had signed an agreement for the
acquisition of 100 per cent of the shares of Maweni Limestone, a
wholly-owned subsidiary of ARM Cement.
The transaction
is subject to certain conditions precedent including receipt of
requisite regulatory approvals. Huaxin is among the top 10 cement
companies in the world in terms of capacity and revenues.
For
Mr Paunrana, the sale of the Tanzanian subsidiary is the final nail on
the coffin of his prized family holding, considering that Tanzania was
supposed to be ARM’s launching pad in its quest to dethrone France’s
Lafarge Group from East Africa’s cement market in 2012.
It
was this unbridled ambition which informed the decision by ARM to turn
to commercial banks, and borrowed a staggering $300 million to invest in
cement and clinker plants with a capacity of 1.2 million tonnes
annually.
The decision to finance the Tanzanian venture through short-term debt has come back to haunt ARM.
In
Kenya, the case with National Cement, a subsidiary of Devki Group, a
family-owned conglomerate with interests in cement, steel products,
roofing sheets and aviation, has also been a painful one.
The
court ruling this week by Justice Mary Kasango sitting in Nairobi
dismissed the application filed by Mr Paunrana in July to stop the sale
of the company on the basis that it was “misconceived and without
merit.”
The development is not just a big blow to Mr
Paunrana but also to tycoon Jaswant Rai of Rai Cement, a company that
was also interested in acquiring ARM and which provided the financial
backing to stop the sale.
The court battle pitting Mr
Paunrana and Rai against industrialist Narendra Raval had stalled the
sale of ARM Cement past the expiry of receivership, having been placed
in administration on August 2018 over debts amounting to $190 million.
Mr
Raval is the main shareholder of Devki Group that entered into an
agreement to acquire ARM in May. With the backing of Rai, Mr Paunrana
halted the transaction on condition that he provides a guarantee
equivalent to 20 per cent of the Ksh6.5 billion ($61.8m) bid price.
However,
the court granted the administrators the liberty to determine whether
the bank guarantee met their requirements for the sale of the Kenyan
operation.
Although Mr Paunrana has a window to appeal,
the ruling ultimately brings to a conclusion the battle for ARM Kenya
that attracted interests from some 25 foreign and domestic companies, 23
of which had signed non-disclosure agreements.
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