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A proposed sale of a significant stake in East African Portland Cement (EAPC) faces intense scrutiny over alleged regulatory breaches and a substantial share discount, raising concerns about transparency and public interest. The transaction could significantly alter the ownership structure of a key national asset.
A parliamentary committee is currently investigating the proposed sale of a substantial stake in East African Portland Cement (EAPC) following the discovery of alarming irregularities. The National Assembly's Committee on Trade, Industry, and Cooperatives has highlighted critical regulatory omissions and a significant share discount as major red flags in the transaction.
The proposed sale involves a 29.2 percent stake in EAPC to Kalahari Cement Limited. This transfer, which includes shares held by Holcim subsidiaries linked to Bamburi Cement, would grant Kalahari Cement an effective 41.7 percent control of EAPC.
Among the primary concerns is the glaring absence of approval from key government agencies for the transaction. The Attorney General's office confirmed it had not provided any approvals, opinions, or certifications for the proposed sale, learning of it only through a public advertisement.
Furthermore, the sale price of KSh 27.30 per share has drawn sharp criticism from lawmakers, who argue it is substantially below market value. EAPC's market price on the Nairobi Securities Exchange (NSE) ranges between KSh 58 and KSh 64 per share. This proposed price is less than half the company's market price and a fraction of its book value of KSh 20.4 billion. The company's assets, including 4,626 acres of prime freehold land, are valued at KSh 35.19 billion.
Critics suggest the undervaluation is an attempt to acquire EAPC's extensive land assets and strategic resources at a significantly reduced price.
Analysts and stakeholders are urging for greater clarity on the timelines, costs, and safeguards surrounding the proposed sale. The development has the potential to influence near-term public debate and policy execution regarding the management of strategic national assets.
EAPC, established in 1933, is a leading cement manufacturer in Kenya, known for its Blue Triangle brand. It plays a crucial role in the nation's construction industry, contributing to housing, education, health, and infrastructure development.
The parliamentary committee has warned that allowing the deal to proceed without addressing the irregularities could lead to the control of a strategic national asset by private interests. There are concerns that the acquisition could be an opportunistic move to secure liquidatable assets to address Bamburi Cement's debt obligations, potentially leaving EAPC operationally weakened and shareholders facing significant losses.
EAPC has recently experienced a significant turnaround, with its share price surging by 716 percent from KSh 7.20 within the last twelve months, making it a top performer on the NSE. The company has returned to profitability after twelve years of losses and operates at 85 percent capacity, paying salaries promptly.
The EAPC Board Chairman, Richard Mbithi, cautioned Members of Parliament that the transaction would fundamentally alter the company's governance dynamics, shifting power from multiple significant shareholders to a single controlling interest. Industry insiders also fear potential cross-pollination of strategic information between competing cement manufacturers, which could distort market competition.
The parliamentary committee's ongoing investigation and its recommendations will be crucial in determining the future of the EAPC stake sale. The government's response to the raised red flags and its commitment to ensuring transparency and protecting public interest will be closely watched. The potential impact on EAPC's operations, its employees, and the broader Kenyan construction sector remains a key area of focus.
