Savannah Clinker Limited has made a new formal bid to acquire up to 100% of the shares in Bamburi Cement PLC, marking a significant move in the competitive cement industry. The company announced the offer with the submission of its Competing Offeror’s Statement, which proposes a cash consideration of KES 70 per share. This offer represents a premium of 53.34% to Bamburi’s last closing price on July 9, 2024, and an even higher premium over the 30-day, 90-day, and 180-day volume-weighted average prices.
Key Details of the Offer
Savannah Clinker Limited’s bid aims to attract shareholders by offering a significant premium, making it a compelling proposition for investors. The offer price of KES 70 per share is notably higher than Bamburi’s average trading prices over various periods, showcasing Savannah’s commitment to acquiring the company. If successful, the deal would result in a full takeover of Bamburi Cement by Savannah Clinker.
According to the Competing Offeror’s Statement, Savannah intends to maintain Bamburi’s listing on the Nairobi Securities Exchange (NSE). However, if the offer receives acceptances exceeding 90%, the remaining shareholders will be offered an equivalent market price. Savannah Clinker has emphasized that their aim is to strengthen Bamburi’s position within the regional cement market.
Savannah’s Background and Offer Strategy
Savannah Clinker is a private company established in 2019 and primarily engages in mining, processing, and selling cement. The firm’s significant investment in the development of a limestone extraction and clinker processing plant in Kitui County positions it as a strong player in the cement market. Additionally, Savannah’s board comprises experienced leaders in the industry, including Executive Chairman Benson Sande Ndeta, who has held senior roles in the cement industry for over two decades.
Mr. Ndeta’s extensive experience in the sector includes a previous stint as Chairman of East African Portland Cement Limited. Despite this, there are no existing contractual or financial ties between Savannah Clinker Limited and Savannah Cement Limited, a company that was placed into administration in July 2023. This separation is aimed at avoiding any perceived conflicts of interest in the competing bid.
Financial Projections and Future Plans
Savannah Clinker’s investment strategy involves heavy financial backing for its cement and clinker business. The company has already invested KES 650 million towards technical feasibility work and land acquisition in Kitui County, covering over 600 acres of land with substantial limestone reserves. These reserves are estimated to last more than 50 years, based on the company’s geological assessments.
Savannah’s financial model, prepared in collaboration with UK-based Strata Global Ltd, projects substantial returns. By the end of the initial 36-month construction and optimization period, Savannah expects to achieve an annual EBITDA of at least USD 150 million over the next five years, with cumulative net cash flow surpassing USD 1.2 billion.
The financial projections indicate a steady increase in revenues from 2026 onward, starting at USD 284 million and growing to USD 425 million by 2031. With these ambitious projections, Savannah aims to capitalize on its substantial reserves and extensive market experience to position Bamburi Cement as a key player in the East African cement industry.
| Financial Projections for Savannah Clinker Limited | |—————————————-|————————————–| | Year | Projected Revenue (USD) | | 2026 | 284,833,981 | | 2027 | 362,458,503 | | 2028 | 376,193,294 | | 2029 | 391,519,989 | | 2030 | 407,471,117 | | 2031 | 425,235,834 |
Offer Conditions and Regulatory Compliance
Savannah Clinker’s offer is subject to several conditions, including the written approval from the Cabinet Secretary for Mining, Blue Economy, and Maritime Affairs, and regulatory approval from the Competition Authority of Kenya. The offer is also contingent upon the acquisition of at least 60% of Bamburi’s issued shares. The company has confirmed that funding for the takeover is secured through a reputable international firm, ensuring the necessary cash for the transaction.
To execute the offer smoothly, Savannah has engaged Faida Investment Bank Limited as its transaction advisor. Faida has confirmed that the funding is free and unencumbered, ensuring that all shareholders who accept the offer will receive the proposed consideration.
Impact on Bamburi’s Employees and Future Operations
In its statement, Savannah Clinker highlighted the importance of maintaining Bamburi’s current workforce. The company plans to leverage the experience of Bamburi’s management and employees to ensure a seamless transition and continued growth. It has also committed to upholding the existing employment rights and contractual obligations in accordance with the law.
Savannah’s offer focuses on providing avenues for career growth and employee retention, reinforcing the company’s commitment to maintaining stability within Bamburi Cement. This assurance aims to dispel concerns regarding potential disruptions to Bamburi’s operations or employment.
Industry and Market Implications
The proposed takeover represents a strategic move by Savannah Clinker to establish a strong foothold in Kenya’s cement market. Bamburi Cement has long been a dominant player in the East African region, with a well-established brand and market presence. If successful, the acquisition will enable Savannah to consolidate its position and expand its market share.
This offer also comes amid increasing competition within the cement industry, as companies seek to tap into the growing demand for construction materials across East Africa. Savannah’s investment in clinker production aligns with the government’s push to reduce the reliance on imported clinker, thereby supporting the country’s industrialization agenda.
Savannah Clinker’s bold bid to acquire Bamburi Cement signals a significant shift in the regional cement industry. The proposed offer, backed by strong financial projections and strategic investments, showcases Savannah’s intent to build a robust and competitive business. With its focus on retaining employees and maintaining market stability, the company aims to drive growth and secure Bamburi’s future in the rapidly evolving cement market.
