Afrimat in R1bn deal to buy Lafarge SA

Listed open-pit mining group Afrimat has entered into a share purchase agreement with Holicim Group for a 100% stake in cement and construction materials company Lafarge South Africa (LSA) for $6 million (around R109 million), however the deal also includes a loan repayment component of around R900 million.

Afrimat confirmed the acquisition in a JSE Sens announcement on Tuesday.

Listen/read: Afrimat looking at opportunities like a kid in a candy store

The announcement saw Afrimat’s share price surging over 12% in morning trade (around 10.40 am), exchanging hands at over R60 a share.

Afrimat’s share price

The group noted that in addition to the $6 million ‘locked box’ transaction, Afrimat has agreed to procure the repayment of LSA’s loans amounting to R900 million, starting with a R500 million payment which will be settled on the closing date.

“The Outstanding Seller Group Loan will be interest free and will be repaid by no later than twelve months after the closing date. The Seller Group Loan will, on the closing date, be converted into Euro,” the group said.

Afrimat said the deal falls in line with its expansion plans to grow its national footprint and product offering.

The deal is further expected to drive efficiencies within its construction materials division.

“Operational synergies between the two businesses are substantial, considering Afrimat’s existing national footprint of aggregate quarries, ready-mix concrete operations and precast manufacturing operations, and we believe that the time is right to strengthen our construction materials division,” said CEO Andries van Heerden.

Strong market presence

LSA has a strong presence in the construction industry supplying products like aggregates, concrete, cement and fly-ash to the local market.

“A key focus of Afrimat is our conscious operational efficiency initiatives, which are aimed at expanding volumes, reducing costs, and developing the required skill levels across all staffing categories,” said van Heerden.

“This exciting deal forms part of the Afrimat Group’s ongoing diversification strategy.”

“It will increase Afrimat’s offering in the construction industry, by expanding our quarry and ready-mix operations nationally and allowing for Afrimat to enter the cement value chain competitively,” he added.

The deal is however still subject to approval by competition authorities, the minister of mineral resources and energy as well as the financial surveillance department of the South African Reserve Bank.

According to Afrimat, the deal will be effective on the 10^th business day after all conditions have been met and approvals secured.