* To create South Africa giant with 60 pct market share
* PPC shares hit 9-month high
* Consolidation of industry starting says PPC CEO
(Adds share price, analyst comment, CEO comment)
By Tiisetso Motsoeneng and Nqobile Dludla
JOHANNESBURG, Feb 13 South Africa's PPC Ltd
proposed merging with its nearest rival Afrisam Group
on Monday, in a renewed attempt to combine the two and an effort
to lead consolidation.
PPC, which abandoned talks with Afrisam two years ago, said
it had revived discussions about a potential merger, sending its
shares to their highest level in nine months.
"We think that consolidation in the industry will start to
happen and we've got to make a choice as to whether we want to
be the architects and lead that ... or ... let it happen around
us and not be sure of the outcome," PPC's chief executive Darryl
Castle told Reuters following the announcement.
Afrisam, which is majority owned by the Public Investment
Corporation pension fund, first proposed a merger in 2014 when
PPC's share price had been under pressure due to infighting
between its board and former chief executive.
However, PPC's share price is up by nearly a third so far
this year, after suffering a sharp fall in mid-2016 when the
company lost its investment grade debt rating and was forced
into a deeply discounted rights offer. PPC's shares had lost 44
percent in 2015, and nearly 12.5 percent in 2014.
Shares in PPC, which is valued at about 11 billion rand
($823 million) and did not give details of the proposed merger,
were up 2.29 percent at 7.16 rand by 1236 GMT.
"The parties have independently concluded that current
market circumstances warrant entering into formal discussions to
consider the proposed merger," PPC said in a statement.
The merger would create an entity that is financially
stronger and well placed to compete globally, with assets across
six African countries.
"In South Africa, PPC is already the dominant player and
merging with Afrisam would create an entity with more than 60
percent market share," Afrifocus Securities equity analysts
said, adding that the key issue would be obtaining approval from
the country's competition commission.
PPC, along with South African construction firms, is
struggling to grow revenue and sales, partly due to a slow
roll-out of a three-year government infrastructure investment
It has responded by borrowing heavily to build factories in
Ethiopia, Rwanda, Zimbabwe and the Democratic Republic of Congo
to boost overseas sales.
($1 = 13.3681 rand)
(Editing by Biju Dwarakanath and Alexander Smith)