In the past 12 months, several NSE listed companies have reported a decline in earnings. As a result, businesses have engaged in massive lay off exercises to remain profitable. EABL, Stanbic Bank, EA Portland Cement, and KCB group are a few of the companies that have recently terminated some of their workers’ contracts due to worsening economic conditions.
Employees at Athi River Mining Cement Company face a similar risk. The company has been in turmoil since 2018 when it failed to meet its financial obligations to creditors, suppliers, and workers.
ARM was suspended from trading at the NSE in August 2018 due to financial burdens. In the same month, the cement manufacturer was put under administration whereby insolvency practitioners Muniu Thoithi and George Weru were appointed as the joint administrators.
The role of administrators is to provide a suitable solution for the firm’s creditors, shareholders, employees, and all stakeholders in the business.
Following their appointment, ARM’s administrators, Muniu Thoithi and George Weru, proposed the sale of the debt-ridden company to a fitting buyer. The firm’s creditors overwhelmingly agreed to the proposal during a meeting with the executives on 23rd October 2018.
What followed was a fierce bidding process that attracted local and international investors. The bidding was conducted openly and competitively.
The administrators picked National Cement Company Limited as the winning bidder after a rigorous selection exercise that went on for several months. National Cement offered to acquire the Kenyan assets of the struggling company at the cost of KSh5 billion.
However, ARM’s Cement CEO Pradeep Paunrana moved to court to stop the sale. Mr Pradeep argued that the administrators rejected his offer with Rai Group to acquire the listed cement company.
High Court judge Justice M. Muigai granted Pradeep’s request on 12th July and issued an injunction against the transaction.
Following the court order, over one thousand workers at the cement company are at risk of losing their jobs. Additionally, ARM’s debts continue to mount, worsening the situation.
ARM has not released its financial results since suspension from the NSE in August 2018. The future of the company is uncertain after the administrators’ term came to an end on 16th August 2019.
Paul Ogunde, the lawyer representing ARM administrators noted, “The Order made on 12th of July 2019 will, if not set aside urgently, occasion substantial and incurable damage to all stakeholders of the company except Mr. Paunrana.”
