Regulatory gaps, discounts: Red flags mount over EAPC stake sale

A parliamentary committee probing the proposed sale of a substantial stake in East Africa Portland Cement (EAPC) has uncovered alarming irregularities, primarily surrounding a massive share discount and critical regulatory omissions.

Among the troubling concerns unearthed by the National Assembly’s Committee on Trade, Industry, and Cooperatives is the glaring absence of approval from key government agencies.

Neither the Attorney General (AG) nor the Competition Authority of Kenya (CAK) played a substantial role in clearing the transaction.

The EAPC board was also not consulted on the sale and reportedly learned about the deal through the media. The transaction involves Tanzanian tycoon Edhah Abdallah Munif’s Kalahari Cement Ltd acquiring a 29.2 per cent stake in the cement maker for Sh718.5 million.

This offer price was set at less than half of EAPC’s market price at the time. The resulting acquisition would grant the buyer significant market control, particularly since Munif’s investment vehicles fully own Bamburi Cement, a major rival.

Despite the numerous red flags, the National Treasury remains keen on the sale. The transaction involves Kalahari Cement signing agreements with Cementia Holdings AG and Associated International Cement Ltd to buy the shares.

This is despite both the Attorney General Dorcas Oduor and CAK confirming that they were either not involved or were only marginally consulted (in the case of CAK) regarding the August agreement.

The selling firms—Cementia Holdings AG and Associated International Cement Ltd—are subsidiaries of the Swiss-based Holcim Group, which is closely linked to Bamburi Cement. Holcim is divesting from its African markets as part of a global restructuring plan, having already sold businesses in Nigeria, Uganda, Tanzania, and Zimbabwe. The decision to sell Holcim’s stake in EAPC received approval from the Capital Markets Authority (CMA), which granted an exemption from mandatory takeover rules under the Capital Markets (Takeovers and Mergers) Regulations, 2002.

In a letter dated August 25, CMA Chief Executive Officer Wyckliffe Shamiah made the revelation, copying it to National Treasury Cabinet Secretary John Mbadi and his Trade and Investment counterpart Lee Kinyanjui.

Market value

Mr Shamiah acknowledged that the agreed consideration “represents a significant discount compared to the current market value, had the shares been acquired through an on-market transaction.”

The regulator, however, justified the price, adding that it “reflects a negotiated price between two shareholders.”

The acquisition is considered a strategic masterstroke for Mr Munif, who is the ultimate beneficial owner of Kalahari through his investment vehicles. According to the CMA letter, Kalahari’s shareholders are Pacific Cement Ltd (90 per cent) and Comercio Et Consiel Limited (10 per cent), both Mauritius-incorporated entities wholly owned by Munif.

EAPC, despite being listed on the Nairobi Securities Exchange (NSE), operates as a parastatal. The government maintains a combined stake of 52.3 per cent, held by the National Social Security Fund (27 per cent) and the National Treasury (25.3 per cent).

The remaining shareholders are Cementia Holdings AG (14.6 per cent), Associated International Cement Ltd (14.6 per cent), Bamburi Cement Ltd (12.5 per cent), and minority shareholders (6 per cent).

If the two Holcim subsidiaries sell their shares to Kalahari Cement, the Munif-associated entities would hold a combined 41.7 per cent stake in EAPC through its association with Bamburi.

This concentration of ownership has fueled fears that fixing the price per share at Sh27.30—significantly lower than the prevailing market rate—grossly undervalues EAPC’s extensive assets, including its vast land holdings.

During a meeting last Thursday, National Assembly members pressed officials from the Competition Authority of Kenya (CAK), expressing deep concern that the acquisition by Kalahari Cement could enable the emerging conglomerate to dominate the local market and engage in price fixing.

Committee Chairperson Bernard Shinali (Ikolomani) and Vice Chairperson Marianne Kitany (Aldai) challenged the CAK officials, led by Director of Competition and Consumer Protection Joel Omari, to explain why the deal was allowed to proceed despite the potential to dilute the current value of government and public shares at the NSE.

“The sale will see Kalahari possess 41.7 per cent of the shares at EAPC, yet you claim that they will not have dominance. But doesn’t it mean that they will have the power to countermand decisions by the board?” queried Kitany, who also voiced concerns over the danger of Kalahari sharing trade secrets with Bamburi.

“As the CAK, does it not concern you that EAPC shares will be sold at half the current trading value at the NSE, thereby diluting the value of government and public shares in the company?” posed Shinali. Gichugu MP Robert Gichimu added: “Where two partners collude to buy shares below the market value, doesn’t that concern you as the competition authority?”

In his defence, Omari explained that CAK played no part in approving the transaction, clarifying that its role was strictly limited to providing advisory opinions as prescribed by law. He stated that the acquisition of shares, in their view, does not constitute a merger under the Competition Act, and therefore, the Authority lacked the powers to approve or block it.

Private transaction

Omari said CAK had no mandate to address the specific pricing and dilution questions raised by the lawmakers, noting that the regulation of the stock market falls squarely under the Capital Markets Authority.

“We are a regulator, but the capital markets have a separate statutory regulator, which is the Capital Markets Authority. The questions raised fall outside the description of CAK,” he stated.

While the National Treasury maintains that the deal is merely a private transaction between shareholders, MPs continued to question the aggressive push to finalise the sale despite all the regulatory and valuation red flags.

The CMA, in its counter-defence, stated that its August 5, 2025, approval was conditional on Kalahari obtaining mandatory approvals from the CAK and the Ministry of Mining, effectively deflecting responsibility for the final green light.

“The transaction is yet to be concluded,” the CMA letter confirmed. Addressing concerns for minority investors, the regulator stated that its exemption was granted after Kalahari committed not to delist EAPC from the NSE, indicating that “a continued listing will support EAPC’s long-term growth ambitions.”

CAK had earlier confirmed it was keenly watching the transaction, stating: “Whereas the proposed transaction has not been formally notified to the authority, as per the requirement of the Competition Act, we are aware of it from media reports. When notified, we shall assess the matter and issue a determination.”