PPC argues that cement consolidation is ‘inevitable’ as talks with AfriSam resume.
Despite some tentative, mixed responses and competition authority uncertainty, PPC and AfriSam believe now is the right time for them to take another shot at merging in an environment primed for consolidation.
Two years after abandoning the first attempt at a merger, PPC CEO Darryll Castle said that both PPC and the cement industry’s environment had evolved to such a point that consolidation was “inevitable”.
PPC and AfriSam last week announced they were considering the large merger to potentially unlock the capabilities to create a major African cement producer that is able to compete more comfortably in the global cement market.
The parties signed a heads of terms to assess the merits of a potential merger, with the “current market circumstances” warranting the start of formal merger discussions.
“The time is right,” Castle told analysts and the media during conference calls aimed at unpacking the start of the assessment phase for the potential tie-up.
Early in 2015, PPC walked away from an AfriSam-driven merger, when the impact of new and emerging entrants Sephaku Cement and Mamba Cement had not yet fully hit the market and the competition authority remedies of the then-merger had overshadowed the reward outcomes.
It made more sense at the time for PPC to focus internally on its cost base and drive efficiencies.
Fast forward two years, the industry has been impacted on by the entry of two new players in a difficult economy saddled with high volumes of imports – and PPC has “achieved what it set out to achieve” in cost savings and efficiencies through internal initiatives.
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