MPs raise alarm over discounted sale of Portland cement

Lawmakers have raised concerns over the planned sale of East African Portland Cement (EAPC) to Tanzanian businessman Edhah Abdallah Munif, citing a price far below the company’s market value and book value.

Munif, through his investment firm Kalahari Cement Limited, is acquiring 26.32 million EAPC shares from Swiss multinational Holcim at Sh27.30 each, valuing the transaction at Sh718.7 million, less than half the company’s current stock price of Sh61.75 per share.

The National Assembly’s departmental committee on trade, industry and cooperatives said the deal undervalues the cement maker’s assets, which include investment properties worth Sh21.23 billion, largely comprising 4,626 acres of freehold land.

EAPC’s total assets are Sh35.19 billion, with liabilities at Sh14.79 billion, giving a net asset value of Sh20.4 billion. The committee warned that the sale could undermine market fairness and public interest.

“Of particular concern to us is the proposed price of the transaction, an amount which is substantially below the prevailing market average price of East African Portland shares, potentially undermining market fairness,” said Aldai MP Marianne Kitany.

EAPC shares have surged 716 per cent over the past year, making it the top performer on the Nairobi Securities Exchange, compared to Sameer (609 per cent) and Kenya Power (435 per cent).

At the prevailing share price, the company is valued at Sh5.55 billion, while Kalahari’s purchase values it at Sh2.46 billion. The firm has not disclosed how it arrived at the offer price for Holcim’s shares.

Investors have cited the illiquid nature of EAPC’s land holdings as a reason for the market undervaluation.

The company has previously planned to sell part of its land to raise Sh10 billion for working capital, following a 2023 court victory against squatters who had occupied the land for about a decade.

During committee proceedings, members urged the Competition Authority of Kenya (CAK) and the Capital Markets Authority (CMA) to reject the discounted offer, arguing it may not serve long-term public interests.

CMA Chief Executive Wyckliffe Shamiah, however, said the regulator cannot dictate the price as it reflects a negotiated agreement between the buyer and seller.

“The agreed consideration represents a significant discount compared to the current market value. However, the pricing reflects a negotiated price between two shareholders,” said Shamiah. He added that the share price had been volatile due to speculation after Holcim announced its exit from African markets.

Munif’s acquisition comes after his firm, Amsons Group, completed the full purchase of Bamburi Cement for Sh23.6 billion in December, strengthening his position in Kenya’s cement sector.