Kenya Insights

Tag: Holcim

  • Red Flags Over Secret Deal With Purchase of Portland Cement Shares By Tanzanian Tycoon

    Red Flags Over Secret Deal With Purchase of Portland Cement Shares By Tanzanian Tycoon

    A controversial deal that could see Tanzanian billionaire Edhah Abdallah Munif acquire a controlling stake in Kenya’s East African Portland Cement Company (EAPC) has exposed serious concerns about asset stripping, market manipulation, and the erosion of Kenya’s industrial base.

    Parliament has now intervened, directing EAPC to pursue a share buyback instead of allowing the deeply discounted sale to proceed, as lawmakers raise alarm over what appears to be one of the most questionable corporate transactions in recent memory.

    The deal centers around Munif’s acquisition of 26.32 million EAPC shares from Swiss multinational Holcim using an investment firm known as Kalahari Cement at Sh27.30 each, valuing the deal at Sh718.7 million.

    However, Portland Cement shares closed trading at Sh56 a piece yesterday, placing the market value of the firm at Sh5 billion, revealing the staggering discount being offered to the Tanzanian investor.

    The mathematics are stark and troubling. At current market prices, the 29.2 percent stake being acquired would be worth Sh1.4 billion at the current share price, yet Munif is paying less than half that amount.

    This represents a discount so severe that it has prompted accusations of preferential treatment and potential insider dealing.

    More concerning is the true value of what Munif is acquiring. EAPC’s net asset or book value stands at Sh20.4 billion, as per the company’s latest audited financial results dated June 2024, with total assets of Sh35.19 billion against total liabilities of Sh14.79 billion.

    The bulk of this wealth lies in investment properties worth Sh21.23 billion, largely freehold land comprising 4,626 acres held under long-term lease arrangements.

    This land portfolio has become the elephant in the room.

    Members of the parliamentary committee on trade, industry and cooperatives reckon that the firm acquiring the stake is eyeing EAPC assets, notably land that is valued in excess of Sh20 billion.

    The company has already indicated plans to monetize this asset base, having won a court battle in 2023 against squatters who had occupied the land for about 10 years, with plans to sell off part of its expansive land holdings to raise Sh10 billion towards working capital.

    The timing and structure of the deal raise additional red flags.

    Munif’s Amsons Group completed the full acquisition of Bamburi Cement in December for Sh23.6 billion, cementing its hold on Kenya’s cement market.

    With Bamburi Cement already owning 12.5 percent of EAPC, he will emerge as the single-largest shareholder of the Athi River-based company with a 41.75 percent stake if the current deal proceeds.

    This consolidation is occurring as the East Africa cement market reached $2.66 billion in 2024 and is projected to climb to $2.98 billion by 2033, making control of major producers increasingly valuable.

    The strategic importance of EAPC, one of Kenya’s oldest cement manufacturers that operates as far as Uganda, cannot be understated in this context.

    Public interest concerns have intensified given the ownership structure of EAPC.

    The State and the National Social Security Fund (NSSF) have a combined stake of 52 percent in EAPC, with pensioners, through the NSSF, owning a 27 percent stake while the government, through the Treasury, owns a 25 percent stake.

    This means that millions of Kenyan workers and retirees stand to lose from any undervaluation of their pension fund investments.

    Activist lawyer Okiya Omtatah has sought to block the sale, arguing that should the deal go through, there will be massive losses for Kenyan pensioners.

    The concerns extend beyond immediate financial losses to questions about foreign control of strategic national assets.

    Parliament’s intervention reflects growing unease about the deal’s transparency and fairness.

    Members of the National Assembly Committee on Trade, Industry and Cooperatives want EAPC to buy back the shares at market value and sell for a profit later, with Kajiado South MP Samuel Parashina pointedly asking management, “Why are you waiting for the shares to be sold? Why not buy it back now?”

    EAPC Managing Director Mohammed Osman has acknowledged the feasibility of this alternative, telling the parliamentary committee that the firm will pursue the share buyback option if directed by Parliament, noting “We have the capacity to buy back the shares… We have the cash flow to settle the amount because we have turned around the company”.

    The dramatic recovery in EAPC’s share price supports this confidence.

    In the past year, the EAPC share price has gone up by 359 percent from Sh7.2 a unit, making it one of the top performers at the bourse in the period. This performance trajectory makes the discounted sale even more questionable.

    Regulatory authorities find themselves in an uncomfortable position.

    CMA chief executive Wyckliffe Shamiah said the regulator was powerless in dictating the offer price, arguing it reflects an agreement between buyer and seller.

    However, the Capital Markets Authority approved the controversial sale at a price it acknowledged was a steep discount, raising questions about regulatory oversight.

    The broader implications extend to Kenya’s industrial sovereignty and economic security. The cement industry represents critical infrastructure for national development, and the concentration of market power in foreign hands through questionably priced transactions sets a troubling precedent.

    As Parliament pushes for a share buyback solution, the EAPC case has become a test of Kenya’s ability to protect strategic national assets from predatory acquisition.

    The outcome will likely influence how similar deals are structured and scrutinized in the future, making it a watershed moment for corporate governance and public interest protection in Kenya’s capital markets.

    The red flags are clear and numerous: massive discounts to market value, even steeper discounts to book value, timing that benefits from market manipulation, consolidation of market power, and potential asset stripping of valuable land holdings.

    Whether Parliament’s intervention can prevent what many view as a fire sale of national assets remains to be seen, but the controversy has already exposed significant weaknesses in Kenya’s framework for protecting strategic investments from questionable foreign acquisition.

  • Tanzanian Tycoon Exposed in Insider Dealing Scandal Over Portland Cement Acquisition

    Tanzanian Tycoon Exposed in Insider Dealing Scandal Over Portland Cement Acquisition

    Edhah Abdallah Munif’s strategic moves raise serious questions about market manipulation and anti-competitive practices in Kenya’s cement industry

    Tanzanian business magnate Edhah Abdallah Munif finds himself at the center of a brewing scandal as competition authorities scrutinize his calculated acquisition strategy that has positioned him to control nearly one-third of Kenya’s cement market through potentially illegal information sharing arrangements.

    The controversy centers on Munif’s audacious bid to acquire an additional 29.2% stake in East Africa Portland Cement Company (EAPC) for Sh718.7 million, a deal that comes suspiciously close on the heels of his December 2024 acquisition of Bamburi Cement for Sh23.6 billion.

    The Web of Control

    What makes this acquisition particularly troubling is the intricate web of cross-ownership it creates. Through his investment vehicle Kalahari Cement, Munif is purchasing 26.32 million EAPC shares from Swiss multinational Holcim at Sh27.30 each – a staggering 74.5% discount to the market price of Sh47.65 per share.

    This discount alone raises red flags about potential insider dealings. Why would Holcim sell at such a significant loss unless there were underlying arrangements that benefited both parties at the expense of market transparency?

    The deal will make Munif the single-largest shareholder in EAPC with a 41.75% stake, while his Amsons Group already owns Bamburi Cement outright, which itself holds 12.5% of EAPC. This cross-ownership structure creates an alarming concentration of market power.

    Market Manipulation Concerns

    Industry analysts are questioning whether Munif’s strategy constitutes a systematic attempt to manipulate Kenya’s cement market. His companies will control the equivalent of 31% of the country’s cement production capacity of 14.5 million tonnes per annum, giving him unprecedented influence over pricing and supply chains.

    The Competition Authority of Kenya (CAK) has confirmed it will investigate the deal for potential violations of Section 21 of the Competition Act, which prohibits restrictive trade practices including price fixing, collusive tendering, and market division.

    “Cross-directorship may facilitate outlawed conduct such as the exchange of commercially sensitive information or market coordination,” warned CAK Director-General David Kemei, signaling the authority’s serious concerns about the arrangement.

    The Discount Scandal

    Perhaps most damning is the massive discount at which Munif is acquiring his EAPC stake. At yesterday’s closing price, EAPC shares traded at Sh47.65, yet Holcim is selling to Kalahari Cement at just Sh27.30 – a discount that suggests either gross undervaluation or preferential treatment.

    Even more shocking, both the market capitalization of Sh4.29 billion and Kalahari’s purchase valuation of Sh2.46 billion fall far below EAPC’s book value of Sh20.4 billion, raising serious questions about asset stripping or manipulation of company valuations.

    Regional Empire Building

    Munif’s cement empire extends beyond Kenya’s borders, creating potential for regional market manipulation. Through Pan African Cement, he controls Tanzania’s Mbeya Cement Company, while his diversified portfolio includes the Camel Oil fuel brand operating across Tanzania, Kenya, and Mozambique, plus freight operations through East Africa Warehousing and Kalahari Trans Zambia.

    This regional network provides multiple channels for potentially coordinating market activities across East Africa’s cement and related industries.

    The CAK has warned it may impose “structural or behavioural remedies” including limitations on directorships and restrictions on information sharing between Munif’s companies. However, critics argue that such measures may be insufficient to prevent the kind of market coordination that this ownership structure enables.

    The authority’s admission that it learned of the deal through media reports rather than formal notification also raises questions about regulatory oversight and whether Munif’s team deliberately avoided proper disclosure procedures.

    The cement industry has already shown signs of stress, with production declining from 9.62 million tonnes in 2023 to 8.85 million tonnes in 2024. Munif’s consolidation strategy comes at a time when the market can ill afford further concentration that could limit competition and inflate prices for consumers.

    His control over both Bamburi (22% market capacity) and significant influence in EAPC (8.96% capacity) positions him to potentially coordinate pricing and production decisions that could harm consumers and smaller competitors alike.

    The Billionaires’ Battle

    Industry observers describe the situation as setting up a “billionaires’ fight” for control of Kenya’s cement market, with Munif facing off against established players like the Rai family (Rai Cement) and Narendra Raval (National Cement, Athi River Mining, and Cemtech).

    However, Munif’s cross-ownership strategy gives him advantages that his competitors lack, potentially allowing him to access and coordinate sensitive business information across multiple major players.

    As the CAK prepares its formal investigation, the business community will be watching closely to see whether Kenya’s competition laws have sufficient teeth to prevent what appears to be a systematic attempt to consolidate market power through questionable acquisition practices.

    The scandal has broader implications for Kenya’s business environment and foreign investment climate. If wealthy foreign investors can circumvent competition laws through complex ownership structures and preferential deal-making, it undermines the principles of fair market competition that Kenya has worked to establish.

    The outcome of this case could set important precedents for how Kenya handles cross-ownership issues and whether its regulatory framework can effectively protect consumers and smaller businesses from anti-competitive practices by well-resourced international investors.