Kenyan Steel tycoon Narendra Raval’s $50 million acquisition of ARM Cement has hit a roadblock after the cement company’s former CEO and leading shareholder, Pradeep Paunrana, went to court challenging the sale. PricewaterhouseCoopers (PwC), the administrators of ARM Cement, are the respondents in the court case.
Last month, Devki Group, a steel and cement conglomerate owned by multi-millionaire Narendra Raval, announced that it had won a bid to acquire Athi River Mining (ARM) Cement, a struggling Nairobi-based cement company, for $50 million. It turns out that a consortium of investors led by former CEO Paunrana had made a bid of $65 million for the company, but PwC turned the offer down because it was not accompanied by proof of funds among other reasons. Instead, PwC approved the sale of ARM Cement to National Cement, a subsidiary of Raval’s Devki Group that offered $50 million. In the court case, Paunrana and his lawyers argue that the $50 million offered by National Cement undervalued ARM Cement.
In a statement issued in May, PwC had said that the offer letter by the Paunrana consortium did not sufficiently demonstrate any proof of funding and what was provided was simply a conditional “Expression of Interest” that did not provide comfort and deal certainty, a major consideration for the bidding process. PwC also said that Paunrana’s bid was received more than a month after the deadline for submission of bids.
Paunrana’s lawyers however, have argued that there is no reason why their client’s offer should have been rejected.
“The purported asset purchase agreement between the respondent and National Cement had not been signed by the time the aforesaid consortium offer had been received by the respondents and there is no credible justification for the acceptance by the respondents of the National Cement bid prior to execution of the agreement, which bid fell a whole $15 million below the consortium’s bid,” Paunrana’s lawyers said in a statement.
The court is expected to hear the case and give further directions on Thursday next week.
“That in the meantime as the respondents carry out their mandate under the administration order, they shall not execute/complete sale documents and/or transfer, sell the shares/assets of the company until hearing and determination of the instant application,” the judge ordered.
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