International Finance Corporation to fund National Cement’s ARM deal

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The International Finance Corporation (IFC) and KCB Group will finance part of National Cement’s 5 billion shillings bid for ARM Cement’s Kenyan operations.

National Cement, which is buying ARM out of bankruptcy, has lined up a mix of debt and its own funds to finance the transaction.

The chairman and major shareholder of National Cement, Narendra Raval said “we can fund half the deal (2.5 billion shillings) from our own cash flows. The balance we will get from IFC and KCB”.

IFC and KCB have been funding National Cement for years, with their commitment enabling the company to win the ARM auction.

An executive with PwC and one of the administrators of ARM Cement, George Weru said the deal certainty including proof of funds was one of the reasons National Cement’s bid was successful. Unlike others, National Cement also did not attach onerous terms and conditions in its bid.

Mr Weru revealed that “having looked at these criteria, we concluded that the offer from National Cement presented the best outcome for creditors”.

Most rival bidders had sought to buy ARM’s Kenyan operations at a range of between 3 billion shillings and 4 billion shillings. Among the multinationals whose bids were unsuccessful were Nigeria’s Dangote Cement and Oman’s Raysut.

During an interview, the Managing Director of National Cement, Kaushik Pandit said the company will invest 2 billion shillings to improve ARM’s operations over the medium term. A substantial part of the new investment will go into upgrading ARM’s plant and equipment, ultimately enhancing productivity and efficiencies.

Pandit also said the acquisition will raise National Cement’s annual production to 1.4 million tonnes and boost its market share to 13 percent from the current eight percent.

The sale of ARM’s Kenyan business leaves the administrators to focus on Tanzania, the largest subsidiary which is expected to fetch a higher price than the local unit.

Raval noted that National Cement is not interested in Tanzania, saying Kenya is a more attractive market. He said “we are making this deal to expand our market and especially to get a presence in Mombasa”.

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