Singapore rejects Ohorongo deal
25 June 2019 | Business
The planned purchase of a majority stake in Ohorongo Cement by Sino-Singaporean firm International Cement Group was rejected this week by the Singapore Stock Exchange.
The announcement was made by International Cement Group’s board chairperson Ma Zhaoyang to shareholders this week.
The group had expressed an interest in acquiring Schwenk Namibia’s majority stake in Ohorongo Cement for approximately N$1.5 billion. The share sale reportedly includes the purchase of 1.53 million cumulative redeemable preference shares and 100 ordinary shares in Schwenk Namibia.
The deal also involves the transfer of outstanding shareholders’ loans that have been extended by Schwenk Namibia’s parent company, Schwenk Zement International Gmbh, to it.
According to Zhaoyang, Ohorongo Cement was not deemed to be profitable by the Singapore bourse.
“The target business to be acquired is not profitable. The Singapore Stock Exchange noted that the foreign exchange losses arising from the Schwenk loan claim remain in the pro forma financial statements after the proposed acquisition,” Zhaoyang said.
“As the Schwenk pro forma remains and will continue to affect the accounts of the pro forma after the acquisition, the Singapore Stock Exchange was of the view that the proposed acquisition is not able to satisfy rule 1 015(2) which requires the target business to be profitable.”
The bourse had also found that the International Cement Group did not have sufficient financial resources to fund the planned acquisition of Ohorongo Cement.
“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 a shareholders’ loan. Such loans, when considered with the potential losses of the target business, will result in a material adverse financial impact on the enlarged group,” Zhaoyang said.
The Singaporean bourse was further of the opinion that Ohorongo Cement will not be able to generate sufficient profits for the International Cement Group.
“There is no certainty that the target business will be able to generate sufficient profits to service the loans. Thus, the Singapore Stock Exchange is of the view that the proposed acquisition will put the company out of a healthy financial position,” Zhaoyang said.
Ohorongo's current shareholders include the Development Bank of Namibia, the Development Bank of South Africa, the Industrial Development Cooperation of South Africa and Schwenk Zement KG.
Ohorongo commenced production in December 2010 and has a current production capacity in excess of a million tonnes of high-quality cement annually, for both local consumption and special projects.
All raw materials required for the production process are sourced in Namibia and the entire value chain takes place locally.
Notable projects completed using cement produced by Ohorongo include the Neckartal Dam in the //Karas Region, the fuel storage facility at Walvis Bay and the St Helena airport.
The International Cement Group noted that following its successful diversification into the cement business in central Asia in 2017, the group has decided to expand its cement business into Africa.
When compared to building a new cement plant, having a commercially operational plant would eliminate project risk during the construction period, Strait Times reported.
The group is of the view that the proposed acquisition presents an attractive opportunity for it to seize growing business opportunities in Africa, arising from the construction of infrastructure there and/or generated from China's Belt and Road Initiative, it added.
REJECTED: The planned sale of Ohorongo Cement to the International Cement Group has been rejected by the Singapore Stock Exchange.