National Cement Company, which this week signed a deal to buy the Kenyan assets of ARM Cement from its administrator, plans to invest $36 million to modernise the production plants it is acquiring, its chairman said on Friday.
ARM, which was once the second biggest cement maker in Kenya behind LafargeHolcim’s Bamburi Cement, was put under administration last August by some of its creditors over debts totalling $190 million. Its shares were then suspended from the Nairobi bourse.
National Cement emerged as the winner of a bidding round to buy the company’s Kenyan assets, including land and plants, agreeing to pay $50 million, ARM’s administrator PWC said on Tuesday.
National Cement, which holds 11 percent of the Kenyan cement market with its Simba Cement brand, wanted to raise its production capacity in the East African nation, where cement consumption has been rising in recent years due to a construction boom.
The eight-year old cement firm was especially keen to have an extra production plant on the Kenyan coast, where it does not have a presence, said National Cement chairman and founder Narendra Raval.
A total of $29 million of the new investment will go towards modernising the “rundown” production plant at the coast, Raval told Reuters.
“It is in pathetic condition,” he said. The balance will be invested in a second plant situated near Nairobi, he said.
The acquisition of ARM’s plants will initially increase National Cement’s 1 million tonne annual capacity by 400,000 tonnes, Raval said.
ARM Cement has an installed annual production capacity at its two plants in Kenya of 1 million tonnes.
The acquisition will boost its market share to about 15%.
National Cement is also interested in buying ARM’s assets in Tanzania and Rwanda, Raval said, without giving details.
George Weru, one of ARM Cement’s administrators, told Reuters it is still considering what to do with those units, with its options including capital injection, a sale of shares or a sale of the assets.
“It’s still a very flexible kind of process,” Weru said, adding that they aim to complete the administration by the August deadline.
ARM Cement slid into losses after investing heavily in its Tanzanian business in 2014, which did not generate a return.
In Tanzania, ARM has a 1.6 million tonnes in annual production capacity at two plants of equal size. Its Rwanda plant produces 100,000 tonnes a year.
Weru said the settlement of ARM’s liabilities will take longer: “We need to get the proceeds and also complete the adjudication of the claims”.