South African cement maker AfriSam [AFRSMV.UL] launched a new bid for PPC (PPCJ.J) on Monday with an offer that valued its rival at about 9.2 billion rand ($709 million), but an independent PPC board said it was too low. It was AfriSam’s third attempt in three years to merge with PPC and create a pan-African cement group with assets across six countries, after its previous bid was abandoned in February. Under the revised all-share merger proposal, the deal values PPC at about 9.2 billion rand or 5.75 rand per share, and gives AfriSam an enterprise value of 7.5 billion rand. As part of the proposal, the African unit of Canada’s Fairfax Africa Holdings (FAHu.TO) offered to buy 22 percent of PPC at 5.75 rand per share for 2 billion rand and also give AfriSam a cash injection to reduce the merged entity’s debt. The proposal could still be put to PPC shareholders but the initial response of PPC’s independent board, created to assess the AfriSam merger, was that the offer was too low. PPC said it would consider the offer but also said it had received rival offers. “The preliminary observation of the independent board regarding the partial offer from Fairfax is that, as indicated through prior engagements with AfriSam on a possible merger, the current 5.75 rand offer price fundamentally undervalues PPC,” PPC’s Chairman Peter Nelson said in a statement. Avior Capital Markets research analyst Garth Arenz agreed that the offer price was low. “I think the offer price is too low and with the current PPC share price trading above 5.75 rand after the announcement, it means that the market also thinks that 5.75 rand is too low and that a competing offer in excess of 5.75 rand will be presented to PPC,” Arenz said. Shares in PPC closed 8.8 percent higher on Monday at 5.93 rand. The 5.75 rand offer price is about 68 percent less than PPC’s share price in 2014, when AfriSam first proposed a merger. At that time, PPC was trading at 18 rand a share. PPC said it had received other offers from trade bidders, one of whom included a potential cash component, to create a pan-African cement giant. It did not name the bidders, saying the talks were confidential. It said the proposals were “credible and potentially value-enhancing for shareholders to merit careful consideration.” RECAPITALIZATION OF AFRISAM To make AfriSam’s deal possible, Fairfax would also recapitalize AfriSam by acquiring up to 4 billion rand worth of AfriSam’s shares, representing 60 percent of AfriSam’s equity capital and voting rights. “Among other benefits, the investment by Fairfax Africa will greatly reduce the underlying debt of the merged entity which will have sufficient liquidity and capital to compete in its current markets and selectively target growth opportunities on the continent”, said AfriSam acting chief executive Rob Wessels. REUTERS