Cape Town – The cement companies PPC [JSE:PPC] and AfriSam are engaging in merger talks, which they believe will be to the advantage of the shareholders of both firms.
Afrisam admitted to the merger discussions in a statement on Monday, following a company note to investors from PPC, which said the two groups are “assessing the merits of a potential merger”.
Afrisam, which made its intention to merge with PPC known as far back as 2014, said on Monday it has appointed advisors to conduct the relevant assessment of a potential merger between the parties.
The two companies will report back on the outcome of the assessment once finalised.
“Any proposed transaction will also require a number of regulatory approvals, but these approvals will be sought at the appropriate time,” AfriSam said.
A merger could create a more competitive entity in respect of the balance sheet, scale and capabilities to invest in future growth opportunities, AfriSam CEO Stephan Olivier said.
“In addition, the proposed transaction will enhance the goals of achieving greater levels of black industrialisation and economic transformation in South Africa.”
The merger talks follow after PPC CEO Darryll Castle said late last year there are too many players in the cement industry in South Africa for the size of the market and that the sector would benefit from consolidation.
AfriSam on the other hand has been struggling financially in the recent past, due to new competitors in the cement space and the fact that cement supplies outstrip demand. Cheap imports from Asia have worsened the situation.
PPC traded 5% higher at R7.35 at 10:15 on Monday.