How one player could take over Kenya's cement market

Kenya’s cement manufacturing industry could be set for a huge shift after a Tanzanian tycoon made an offer to acquire a significant stake in East African Portland Cement Company Ltd (EAPCC).

Edha Abdallah Munif, the owner of Amsons Group, intends to acquire the 29.2 per cent stake held by Swiss firm Holcim at Sh27.30 per share through a firm - Kalahari Cement, according to the offer advertised on August 1.

If the deal goes through, Munif will be the largest single shareholder at EAPCC, having already taken over the 12.5 per cent stake held by  Bamburi Cement after fully acquiring the latter in November 2024.

Amsons took over Bamburi Cement in a transaction worth Sh23 billion and delisted the firm from the Nairobi Securities Exchange (NSE). The bulk of the financing provided by a local bank.

Questions are now being raised on the latest acquisition foray by the Tanzanian businessman, which will likely create a dominant player in the Kenyan and regional market.

Bamburi and EAPCC together control at least 60 per cent of the Kenyan cement manufacturing industry, valued at over Sh65 billion. The industry is a major beneficiary of the government’s affordable housing programme.

EAPCC, though listed on the NSE, is effectively a parastatal since the government controls a 52 per cent stake through the National Social Security Fund (NSSF), with 27 per cent and the National Treasury at 25 per cent.

Among the key concerns about Munif’s offer is the low valuation of EAPCC.

The tycoon is buying 26.32 million shares and at Sh27.30 each, values the transaction at Sh718.7 million. This is several times cheaper than the company’s total assets, which were valued at Sh35.2 billion in the financial year ended June 2024.

Industry observers note that this latest development further consolidates Munif’s influence in Kenya’s crucial building materials sector. 

Busia Senator Okiya Omtatah says some powerful people in the country could be ganging up to take over State firms. “[EAPCC] is a parastatal listed on the securities exchange. What these firms need is proper management; they are profitable concerns,” the senator told a local TV station. “But now the elites in this country are ganging up with some tycoons around to masquerade as though those tycoons are buying these things, and if you interrogate better, you’ll find that they are just fronts.”

Should the acquisition be approved by the Capital Markets Authority, with his 41.7 per cent stake, Munif would be able to initiate a full takeover of the company – as Amsons did with Bamburi.

Create monopolies

And if Kalahari Cement were to offer the same price of Sh27.30 per share to the other investors and force it through, they will have acquired EAPCC at ten times less its value, about Sh3.5 billion.

“Portland Cement’s assets need to be protected, and not create monopolies that will fix prices the way they want in the market,” said Omtatah.

Kenya’s competition watchdog confirmed it was aware of the intended acquisition through media reports, but said it had not received the application, a mandatory requirement under the Competition Act.

In a statement obtained by Real Estate, the Competition Authority of Kenya (CAK) said it would thoroughly scrutinise the acquisition once formally submitted.  “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,” said CAK Director General David Kemei.

The assessment involves a rigorous valuation of the proposed transaction’s potential impact on competition within the relevant market, considering the market shares of existing players to prevent the creation of monopolies or anti-competitive practices that could harm consumers or stifle innovation.

It also considers the public interest implications, including potential effects on employment, the viability of small and medium-sized enterprises (SMEs), and other crucial socio-economic factors.

This broader scope will ensure that mergers not only benefit the merging entities but also contribute positively to the wider economy and society. 

As part of this comprehensive assessment, CAK said it would specifically examine whether parties to the transaction exercise control over other entities, a critical step in identifying all markets in which the undertakings are active and understanding the full extent of their influence.

This pattern of acquisition signals a significant shift in ownership dynamics within the industry, raising questions about market concentration and future competitive landscapes.

CAK specifically highlighted the issue of cross-directorship, a common practice within Kenyan corporate circles. “Cross-directorship, while common in Kenyan corporate practice, is not in itself an anti-competitive practice under the Competition Act,” the director general said.

“However, this relationship may facilitate outlawed conduct such as the exchange of commercially sensitive information on market coordination.” This suggests a keen eye on potential collusion or data sharing that could undermine fair competition. EAPCC, one of Kenya’s oldest and most iconic cement manufacturers, has faced a tumultuous period in recent years, marked by persistent governance issues, mounting debt burdens, and shifting market dynamics. 

Besides Munif’s offer, new investment could be a vital catalyst, potentially helping to stabilise the firm’s strained operations and reintroduce a much-needed competitive edge in a market increasingly defined by regional and international rivalry.

Turnaround strategy

The transaction occurs at a pivotal time for EAPCC, which operates amidst a complex web of interests. 

The Kenyan government remains a key stakeholder, and this intricate ownership structure means any successful turnaround strategy will necessitate coordinated efforts to address existing debt obligations, implement robust leadership structures, and dynamically respond to evolving market needs.

Backers of the deal who spoke to Real Estate see it as a strong indicator of growing confidence in Kenya’s industrial base and its ambitious infrastructure development agenda. 

They also see the deal as aligning with broader aspirations within East African countries to strengthen economic ties, boost intra-regional trade, and attract long-term investments in foundational sectors such as manufacturing and construction, ultimately fostering greater economic integration across the bloc.

The Competition watchdog affirmed its statutory powers to impose appropriate structural or behavioral remedies if, following a full merger analysis, it determines that a transaction presents potential competition or public interest concerns. 

This mechanism provides a crucial safeguard against adverse market outcomes, ensuring that large-scale acquisitions contribute positively to the economy.

The Standard reached out to the Capital Markets Authority for a comment on Kalahari Cement’s offer but had not gotten a reply by the time of going to the press.