Dangote enters talks to acquire troubled ARM Cement

Dangote Cement Plc has entered into talks to acquire troubled Kenyan rival ARM Cement, which went into administration in August, three people familiar with the matter said this week.

Dangote Cement, which is owned by billionaire Aliko Dangote, is among high profile investors that have been approached by ARM for a potential deal as the firm seeks to pay down its debts.

In an interview with Bloomberg News on Tuesday, Mr Dangote disclosed that his company is discussing an investment with a cement firm with operations in Kenya, Tanzania, and Rwanda.

“We are talking to (a company that has operations in Tanzania, Kenya, and Rwanda) to see if we can take it over,” he said without going into detail.

While Mr Dangote did not identify the target company, his description fits ARM – the only Kenyan cement maker with assets in the three countries.

Dangote has not made a decision on whether to proceed with the deal as the company is yet to conduct due diligence on ARM Cement, a knowledgeable source told Reuters on Thursday.

ARM was in August placed under the administration of PricewaterhouseCoopers (PwC) after failing to find a strategic investor to help it manage debts of 14.4 billion shillings.

The firm’s financial woes can be traced back to 2014 when it spent billions of shillings to build a clinker plant in Tanzania – an investment that has failed to generate income.

The 1.2 million metric tonnes annual capacity plant in the port town of Tanga has struggled to make money amid severe electricity rationing, inadequate supply of coal and stiff competition in the market from rivals, including Dangote Cement.

READ: Cement firms wage fight for clients as new rivals flood market

Insiders at ARM told Construction Kenya that Dangote Cement first expressed its interest in the local rival mid last year and renewed its attention after the company was handed over to PwC.

Dangote, which has about a 45 percent market share in sub-Sahara Africa with an annual production capacity of 45 million tonnes, has long held interest in venturing into Kenya – with plans underway to build two cement factories by 2021.

“Kenya is high on our priorities and we plan to build two plants of 1.5 million tonnes per annum each, near Nairobi and Mombasa, to serve the local market. We hope to be operational in Kenya by 2020/21,” the firm said in its latest annual report.

If a deal with ARM sails through, Dangote will take over an ongoing concern complete with factories, well-established distribution networks, and mining licenses.

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