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South Africa’s PIC reduces shares in largest cement producer PPC

By Xolisa Phillip, in Johannesburg
Posted on Thursday, 11 June 2020 10:54, updated on Friday, 12 June 2020 10:52

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The Public Investment Corporation (PIC), the biggest fund manager on the continent, is rebalancing its listed portfolio and has reduced its shareholding in Pretoria Portland Cement Company (PPC), South Africa’s largest cement producer.

In the same breath, the PIC has increased its respective stakes in retailers Woolworths (15%.07) and Shoprite (15.03%). The state-owned fund manager, which has R2trn assets under management, recently acquired a 13% interest in Morocco’s Aradei Capital for $50m.

“The PIC’s disposal of shares in PPC on 28 May 2020 is part of rebalancing its listed investment portfolio in the ordinary course of the PIC’s business,” said Deon Botha, the head of corporate affairs at the asset manager.

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This means the PIC now holds 19.917% ordinary PPC shares, down from 25%.

In 2017, the asset manager increased its shareholding in the Johannesburg Stock Exchange-listed cement maker when PPC was the subject of bids from various corporate courters.

During that time, Fairfax Financial Holdings, the Canadian insurance conglomerate, made a formal offer on the condition that PPC merged with unlisted rival AfriSam, in which the PIC has a controlling interest of 66%.

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PPC shareholders, including Prudential Investment Managers, were not in favour of that proposition, saying Fairfax’s offer undervalued the company. However, the PIC’s 25% placed the fund manager in a position to veto material transactions made by the PPC board.

Furthermore, the PIC was considered in favour of a tie-up between the biggest and the second-largest cement producers in South Africa.

Sign of the times

Asked if the asset manager’s disposal of the PPC shares meant it no longer deemed the creation of a singular, dominant Southern Africa cement maker possible, Botha responded: “It would be imprudent for the PIC to be drawn into other market speculation as the shares in question are listed stock.”

Anashrin Pillay, the group manager of investor relations at PPC, said: “We are in a closed period and company policy is not to comment on shareholder portfolio movements.”

Swiss buildings material company LafargeHolcim and Nigeria’s Dangote Cement were among the other parties keen on a stake in PPC.

The cement company has an extensive footprint in key Southern Africa markets, as well as a presence in Rwanda, the Democratic Republic of the Congo and Ethiopia. Crucially, its production capacity in the rest of Africa markets made it an attractive prospect to investors looking to cash in on the continent’s infrastructure boom.

Africa portfolio growth prospects

As for the PIC, which invests on behalf of state pension funds, the Aradei Capital transaction represents its focus investing in the rest of Africa. The transaction was announced on 27 May 2020.

Aradei Capital runs a commercial real estate platform in Morocco, where it has a presence in 15 cities. The European Bank for Reconstruction and Development is one of the other major investors in the platform.

“Aradei Capital has the necessary expertise in Morocco that will enable us to deliver on our partnership approach to investing in African property markets,” according to acting PIC CEO Vuyani Hako.

“We are … excited about future growth prospects informed by Aradei Capital’s … solid strategy to diversify into new asset categories and other yield-generating real estate asset classes,” added Hako.

In 2019, the PIC approved investments in the rest of Africa valued at $874m. These included:

  • A $100m equity investment to acquire shares in the African Export-Import Bank, “a leading pan-African multilateral financial institution devoted to finance and promote intra- and extra-African trade across different sectors.”
  • A $26.8m investment in Cipal Telecommunications “for expansion into Angola.”
  • A $19m investment in Balltec for the “beneficiation of platinum in Zimbabwe,” Hako wrote in the asset manager’s 2019 integrated annual report.