ARM Cement recently signed an agreement to sell its Kenyan business to its rival company National Cement. The transaction is valued at KSh5 billion and involves the sale of; an integrated cement plant in Kaloleni, cement grinding facility in Nairobi, and limestone deposits in Kitui. It is said that National Cement will pay for the deal using cash and internally sourced funds. The two businesses did not disclose whether the KSh5 billion trade is before or after paying the debt.
Analysts at SBG securities view the purchase as a good bargain for National Cement. Following the trade, National Cement’s clinker capacity will increase from 1.2 metric tons to 1.6 metric tons per annum, equivalent to 43 per cent of the clinker capacity in Kenya. Its cement grinding ability will double from 1 metric ton per year to 2 metric tons (21 per cent of grinding capacity in Kenya).
The SBG securities analysts estimate that ARM’s Tanzanian business could generate the same amount as the Kenyan business, KSh5 billion. The subsidiary company in Tanzania owns a clinker plant, a grinding factory in Dar es Salaam, lime deposits in Tanga, and a partly completed grinding facility in Tanga.
Several international and local companies could be interested in the Tanzanian business of ARM Cement. Potential buyers include; Dangote Cement, Bamburi Cement, Heidelberg, and Devki group’s National Cement. Purchasing the Tanzanian unit could be a smart strategy to gain entry into the competitive market.
Going by SBG’s calculations, assuming ARM sells off its Kenyan, Tanzanian, Rwandan, and South African businesses net of all debt, investors could earn $100 million (KSh10.1 billion) which roughly equates to KSh10.42 per share. The shares lastly traded at KSh5.55 per share on 20th August 2018 when the stock was suspended from trading at the Nairobi Securities Exchange.
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