AfriSam has submitted a revised merger proposal to PPC, while a regional unit of Fairfax Africa Investments has offered to buy R2-billion of PPC shares, subject to PPC shareholders agreeing to the merger with AfriSam.
PPC on August 25 announced that merger negotiations between itself and AfriSam had been terminated and that AfriSam was expected to draw up a new proposal.
Under the terms of the new proposal, Fairfax will acquire R2-billion worth of shares from willing PPC shareholders on a proportionate basis. PPC will then acquire the entire share capital of AfriSam in exchange for PPC shares at a ratio of 58 PPC shares to 42 AfriSam shares based on a share price of R5.75 per PPC share.
The revised merger proposal includes a R4-billion recapitalisation of AfriSam by Fairfax Africa prior to the merger with PPC.
The significant capital investment by Fairfax will settle almost all of AfriSam’s third-party debt and places the combined company in a strong financial position.
“We are excited that Fairfax Africa sees the investment potential in the combined company as evidenced by its R4-billion investment committed to AfriSam and R2-billion partial offer to PPC shareholders,” AfriSam CEO Rob Wessels said in a statement.
Among other benefits, he said, the investment by Fairfax Africa will reduce the underlying debt of the merged entity, which will have sufficient liquidity and capital to compete in its current markets and selectively target growth opportunities on the continent.
“We strongly support the underlying strategic rationale for the merger, including the potential to create a black empowered national champion for South Africa, that is better positioned to compete in a challenging market environment,” Fairfax Africa CEO Michael Wilkerson said.
PPC chairperson Peter Nelson, however, noted that the independent board’s preliminary observation was that the partial offer from Fairfax at the offer price of R5.75 a share undervalues PPC.
“Of course, the independent board will evaluate every bona fide proposal that would unlock value for shareholders but it is important to remember that PPC is a solid business, focused on delivering shareholder value by improving profitability, maximising our new investment opportunities and strategic options,” he added.
PPC also revealed that it had received two additional “credible indicative” proposals from trade players seeking Pan-African combinations. An independent board is reviewing these proposals.