JSE-listed building materials group Afrimat is edging closer to sealing the deal in its purchase of construction materials provider Lafarge for nearly R1bn.
Afrimat aims to enhance operational efficiency and meet customer demand with the acquisition.
After receiving approval from the financial surveillance department of the Reserve Bank in July, followed by the green light from the Botswana and Eswatini competition authorities in August and consent from the mineral resources & energy minister in October, the group is facing one last hurdle to complete the acquisition.
In a statement to shareholders on Monday, it said all it needs now is approval from the Competition Tribunal after the Competition Commission conditionally approved the merger and referred it to the tribunal.
“The only remaining condition precedent is the approval of the competition authorities in SA,” Afrimat said.
In November, Business Day reported that the commission had approved the merger on condition that it would not result in job losses and the merged entity will divest its interest in general aggregates quarries and ready-mix concrete plants countrywide.
The tribunal has the final say on mergers.
Smalltalkdaily analyst Anthony Clark said the Lafarge deal was slightly bogged down in spurious legalities from a handful of parties that have crawled out of the woodwork to lay individual claims against the Afrimat acquisition.
“The Competition Tribunal is now involved to investigate the veracity (or not) of these claims. I see them as nothing more than ‘gravy training’ and egregious,” said Clark.
He said the growing red tape and bureaucracy in trying to get an acquisition through the commission and tribunal will now constitute an added cost in time and money.
Additionally, he said, the costly delays are putting in jeopardy a deal in which 800 jobs are involved and a large construction company that has been operating without a captain for an extended period.
“The sooner Afrimat can get control of Lafarge the faster the turnaround of the drifting ship can occur,” said Clark. “Lafarge’s potential remains for a material earnings turnaround story.”
The merger, touted by analysts as a “deal of the century” by Afrimat, was first announced in June. It will result in Afrimat buying 100% of Lafarge SA and its subsidiaries, collectively known as the LSA Group, which is owned by a subsidiary of Swiss-French multinational building materials manufacturer Holcim Group.
Afrimat, valued at about R10bn on the JSE, will pay R900m for the assets. The company’s CEO, Andries van Heerden, has said the transaction will give it access to some of the best assets in the SA construction industry amid a lift in demand, at a discounted price.
The Lafarge deal comes as Afrimat says it is seeing an uptick in activity, with Transnet also coming to the party as it battles to fix its rail network.
The latest Afrimat construction index in December recorded the highest level of improvement since the fourth quarter of 2016. The surge included an 11% year-on-year rise in new jobs as 145,000 were added since the start of 2023; building materials rose 9.8% quarter on quarter; and wholesale trade construction lifted 24.4% year on year.
Index author and economist Roelof Botha said factors that might spur further growth include more public-private partnerships; privatising the repair and maintenance of SA’s logistics infrastructure; and the police and contractors working together to take on the so-called construction mafia.
Afrimat share price closed 1.53% higher at R62.39 on Monday, having climbed 14.5% in the past year.
Note: January 22 2024
This story has been updated with analyst comment.
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