JSE-listed industrial metals and mining group Afrimat has decried the slow pace of final regulatory approval for its acquisition of Lafarge, describing the process as frustrating.
Afrimat announced in June that it was 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, for nearly R1bn.
The merger, touted by analysts as the “deal of the century”, will give Afrimat access to some of the best assets in the SA construction industry, amid a lift in demand, at a discounted price. This will allow the company valued at about R10bn on the JSE to enhance operational efficiency and meet customer demand.
Delivering a pre-close update on Friday, CEO Andries van Heerden said the regulatory hurdles associated with acquiring Lafarge were in their last phase, yet stalling.
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 and energy minister in October, the group is facing one last hurdle to complete the acquisition.
Afrimat needs approval from the Competition Tribunal, after the Competition Commission conditionally gave the merger the go ahead.
“The [commission’s] conditions are acceptable to us — we can work with them,” said the CEO, but lamented that the tribunal has had to investigate claims made by “opportunists”.
Despite the commission’s recommendation, the tribunal decided to hold a preliminary public hearing in December. Three interested parties eventually joined the matter.
On Friday, Van Heerden said the delays were a stumbling block for Afrimat’s strategy but also put the livelihoods of Lafarge employees at risk.
“We’ve reached a very, very frustrating phase of the transaction,” he said. “There are a few opportunists that are trying to get some benefits for themselves in the process and it is highly frustrating and obviously a risk for the Lafarge employees because the business is not doing well at the moment and it desperately needs strong management to turn it around.”
“There are 800 people in that business whose jobs are on the line if this deal doesn’t go through”.
Notwithstanding the protracted obstructions, Van Heerden was still upbeat about closing the deal, saying, “It will take a lot for us to walk away from this transaction; this is a crucial deal. We would be very sorry if we couldn’t get this transaction through as it’s a valuable business.”
The group said it was seeing improvements in most of its divisions including the construction materials segment, which saw an increase in demand for road-building materials and a rise in ballast sales to Transnet.
However, the industrial minerals segment was battling to recover, having come under pressure in the first half while the iron ore business was slowed down by Transnet inefficiencies making it unable to fully capitalise on lower shipping rates and favourable currency movements.
“We have seen a nice increase in volumes year on year,” said Van Heerden, “The really bad part of Transnet is actually the domestic side so we are trucking quite a large volume of the sales to ArcelorMittal by road.”
He said the resilience of the group’s diversification strategy away from exports to more domestic business was boding well for Afrimat given the rail and port challenges.
“Where just over a year ago we were very exposed to the export market, in the bigger scheme of things we are becoming less and less exposed to that market and the volatility of international prices,” he said. “So I think the strategy is working and I believe the business is in a good shape.”
At 2.30pm on Friday, Afrimat’s shares had risen 0.78% to R62.99, bringing its gains over the past three months to 12.5%.
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