Another Chinese firm eyes Ohorongo

07 January 2020 | Business

West China Cement has made a bid to acquire Schwenk Namibia's 69% stake in Ohorongo Cement for approximately N$1.5 billion in a recent submission to the Hong Kong Stock Exchange.

This follows a similar bid last year by Singaporean firm International Cement, whose bid Ohorongo owners turned down.





The latest bid was submitted to the Hong Kong Stock Exchange last week Friday [3 January].

Should its bid succeed, China will hold a majority stake in all of Namibia's cement factories. Another local cement manufacturer, Whale Rock Cement is already majority owned by a Chinese company.

“The board is pleased to announce that after trading hours on 3 January 2020, West China Cement and Schwenk Zement entered into the sale and purchase agreement, pursuant to which the West China Cement agreed to acquire from Schwenk Zement the target shares and the its loan in respect of Schwenk Namibia for an aggregate consideration of approximately US$104 410 774,” West China Cement said in a statement.

West China Cement highlighted Ohorongo's dominance in the local cement market as a motivation to buy out Schwenk Namibia.

“Currently, Namibia has only two cement production companies, one of which is Schwenk Namibia Group. In view of the existing supply and demand situation of cement in Namibia and the market demand for cement driven by the aforementioned infrastructure constructions to be developed vigorously in the future, the investment in and the acquisition of Namibia cement production line will be able to improve our Group's profitability in the cement business,” West China Cement said.

West China Cement features on its board Zhaoyang Ma as a non-executive director whose firm International Cement made a bid for the stake in Ohorongo.

Ma's International Cement had a bid turned down by the Singapore Stock Exchange to buy out Schwenk Namibia's shareholding in Ohorongo.

“The company does not have sufficient cash resources to fund the purchase consideration. It intends to possibly obtain significant external loans from financial institutions and shareholders. Such loans, when considered with the potential losses of the target business, will result in a material adverse financial impact on the group,” the stock exchange said at the time of the rejection.

The planned transaction was also flagged for possible money laundering at the time.

“The audit committee and the board is to undertake that so long as the group operates in Kazakhstan, Tajikistan, Namibia and/or any other developing jurisdictions, the company is to put in place adequate and effective systems of internal controls and risk management controls relating to the company's sources of financing of acquisitions,” the stock exchange said.

Silence on local front

The Development Bank of Namibia (DBN), which is a 9% shareholder in Ohorongo Cement, said it was evaluating the planned purchase of Ohorongo Cement by West China Cement.

“DBN will at this stage not comment on the reported share transaction between Schwenk and the buyer, West China Cement. We can however confirm that DBN's shareholding in Ohorongo remains as it is,” its CEO Martin Inkumbi said.

DBN did not respond to questions posed to it when asked whether it would consider upping its stake in the cement manufacturer, a move previously considered by another minority shareholder in Ohorongo, the Industrial Development Commission (IDC).

The Namibia Competition Commission did not respond to a query when asked whether a submission on the part of West China Cement had been made regarding the planned acquisition.

Local economist Klaus Schade said given the size of the investment, it would be difficult for a single local investor to buy into Ohorongo Cement.

“It is quite a significant investment and would need a group of investors to come together. I am not sure if there is an individual that would be prepared to take the risk,” Schade said.

UP FOR SALE AGAIN: West China Cement wants shareholding in Ohorongo Cement. Photo: FILE

OGONE TLHAGE

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