Johannesburg - Two key shareholders of AfriSam have been
dealt a severe blow, after a consortium of creditors led by Phuthuma Nhleko
concluded a deal on Friday with the Public Investment Corporation (PIC) that
will end their control in South Africa's second-largest cement producer.
Bunker Hills and Swiss group Holcim are destined to lose
their control of AfriSam after Nhleko’s Worldwide Africa Investment Holdings
(WAIH) and senior creditors reached an agreement with influential shareholder
the PIC, which will result in AfriSam’s R19bn gigantic debt being reduced by
R8.4bn.
Infighting between three AfriSam shareholders had led to
fears that the company will default on R11bn debt due to be paid to senior debtholders
before the end of January next year. In one camp, there was black investor
Bunker Hills and Holcim, which jointly controlled 52% of AfriSam.
This camp resisted a restructuring of the cement producer
that would lead to this shareholding being wiped out.
In the other camp there was the PIC, which owns 20%, which
wanted senior creditors like WAIH to convert their debt in AfriSam into equity.
The PIC stepped up pressure on its opponents by converting
its preference shares in AfriSam into ordinary shares in a move to seize
control of the firm. Bunker Hills prevented the move through a court interdict.
But last week, the North Gauteng High Court in Pretoria
ruled in favour of the PIC to convert R4.7 bn worth of its preference shares in
AfriSam into ordinary shares. The PIC had demanded the R4.7bn be paid back by
Bunker Hills, which it borrowed from the fund manager to acquire a controlling
stake in AfriSam.
The conversion will result in the PIC controlling more than
99% of the cement maker and will virtually wipe out the shareholding of Bunker
Hills and Holcim. Bunker Hills is appealing the ruling, but Holcim said this
week that it was assessing the situation and would not comment further.
PIC chief executive Elias Masilela had told City Press earlier
in the week that it was considering bringing in WAIH as its strategic partner
in AfriSam once it had seized control of the company.
“They are one of the considered strategic partners,” he
said.
Bunker Hills has been fighting off WAIH’s advances on AfriSam
and has even accused the company, led by former MTN chief executive Nhleko, of
trying to cannibalise black investors in AfriSam. An initial attempt by WAIH to
buy a controlling stake in AfriSam was opposed by Bunker Hills.
WAIH then bought a portion of AfriSam debt in the market,
but it wants to convert the debt into equity. The R8.4bn reduction in AfriSam’s
debt comprises the PIC's conversion of its R4.7bn preference shares and WAIH’s
conversion of its R3.7bn debt. At this stage it is not clear how much equity
WAIH will hold in the cement maker.
Nhleko’s ambition is to expand AfriSam operations across
Africa. He has extensive contacts on the continent, which he made while he
presided over the expansion of telecoms giant MTN across Africa. Masilela said
WAIH’s vision dovetails with the PIC’s African investment strategy.
The state fund manager has been given the green light by
government to invest 10% outside South Africa of the R1 trillion it manages
on behalf of the state pension savers. Half of the money designated for
investment outside the country will be invested in the rest of Africa.
Patuxolo Nodada, the managing director of Siga Capital, said
Nhleko’s involvement in AfriSam could have positive financial spinoffs for
future shareholders of the cement company. He said the skilful dealmaker was
bringing management expertise, cash and access to the markets - three vital
ingredients AfriSam needs if it wants to be an African giant.
“Currently, Bunker Hills shareholders have debt and they
can't sleep peacefully because they don’t know where the money is going to come
from to repay the debt.
"Even if they are left with 1% of AfriSam, the value of this
1% is going to be five times bigger in five years if Nhleko is allowed to lead
the company,” Nodada said.
He added that he would not be surprised if Nhleko was roped
in as an executive chairperson to lead AfriSam’s charge on the continent.
“He has a second chance to build another African giant. For
the next 25 years, cement is going to be a core ingredient in the building of
infrastructure. I think once he comes in, we will see a big management
reshuffle at AfriSam,” Nodada said.
Masilela said the PIC would sit down with Bunker Hills and
Holcim to give them an opportunity to invest in a restructured AfriSam. This
means the companies will have to buy new shares to remain invested in
AfriSam.
“The restructuring is about money. If the shareholders have
sufficient confidence in AfriSam, they must put in more money,” said Masilela.
Masilela said: “We have observed that over the years,
delegating control to others causes problems. We want to control the company
until it is on an even keel and then allow the strategic partners to take the
lead.
“Ultimately, we are not a cement company, but we want to
influence decisionmaking.”
- City Press