Portland’s Sh1.6bn stake offered for just Sh718m, MPs cry foul

A fresh probe shows plans to dispose of an estimated 26.3 million shares of East African Portland Cement to the new shareholders at less than half the current market price.

Kalahari Cement Limited had proposed to purchase the combined total shares worth Sh718.67 million at Sh27.5 per share, from two key shareholders, Associated International Cement Limited (AIC) and Switzerland-based Cementia Holding AG.

However, it is emerging now that the share price is way lower than EAPC’s prevailing market price of Sh62.50 as at Tuesday afternoon.

This means that at the current market value, the shares will cost the investors Sh1.6 billion to acquire the stake that is now making them the majority shareholders.

Members of parliament are now questioning why the transaction was being struck at a steep discount, way below the market price.

Sessional chair of the Committee on Trade, Industry and Cooperatives Marianne Kittany pointed out to uncertainties over the deal saying that it raises concerns of the potential altering of the company corporate control of the minority shareholder.

“The proposed price of 27 shillings and 50 cents, is an amount which is substantially below the prevailing market average price of East African Portland shares,” said Kittanny.

The committee fears minority shareholders could be disadvantaged by the undervaluation.

“The market is here to protect investors and ensure accountability. When share sales are struck far below trading value, minority shareholders are exposed to losses and confidence in the market is undermined,” added the chair.

The committee argues that if the transaction is concluded, the new buyer would control more than 40 per cent of the cement manufacturer, surpassing the National Treasury and the National Social Security Fund (NSSF), which currently hold 25.3 per cent and 27 per cent respectively.

The Competition Authority however, downplayed the sentiments that the acquisition was likely to create a dominant player in the market.

Citing its act the Authority pointed out that for it to intervene the threshold of the transaction must be above Sh1 billion.

“Authority is legally constrained from conducting a competition and public interest assessment since the transaction is not notifiable in accordance within Section 42 of the Act,” said Competition Authority in submissions to the committee.

Capital Markets Authority (CMA) was also first to clarify its role in the proposed sale of a 29.25 per cent stake in East African Portland Cement (EAPC).

Appearing before the committee, CMA Chief executive Wyckliffe Shamiah said the transaction remains at a preliminary stage and is subject to multiple regulatory approvals.

“CMA granted an exemption from a full takeover process on condition that all necessary approvals are obtained. We are not approving the transaction itself, but ensuring it complies with disclosure and takeover regulations,” said Shamiah.

CMA also confirmed that the parties involved—linked to the multinational Holcim Group, which has exited several African markets—intend to execute the transfer as a private transaction.

The committee further raised concerns about EAPC’s financial health, noting a 23 per cent decline in profit in the 2022 financial year, high debt levels, and ongoing land ownership disputes.

The cement maker has faced years of financial strain. In 2022, it reported a 23 per cent drop in profits, while still grappling with heavy debt, litigation over land ownership, and operational inefficiencies.

MPs say these structural problems make it critical for public institutions like NSSF and Treasury to safeguard their investments.