Lafarge’s landmark deal: shareholders vote tomorrow

Lafarge Wapco plc. will tomorrow, Wednesday have its fifty-fifth Annual General Meeting (AGM) in Lagos.

Shareholders in Nigeria will vote for or against the Lafarge Africa deal – a proposal to marry the Nigeria and South Africa businesses of Lafarge Cement Wapco plc.

The outcome of this meeting will determine what direction the company will follow and would mark what is being described as the “final lap” on expansion plans in creating a leading sub-Saharan African brand – Lafarge Africa.

This voting will be done as a special resolution during the AGM. A vote ‘for’ will mean a landmark transaction that will lead to the creation of a growth platform that will strengthen Larfarge Wapco’s competitive position and presence in the two largest economies on the African continent, Nigeria and South Africa.

BusinessDay last week reported concerns raised by a group of minority shareholders about the deal. South Africa based fund management company, Coronation Fund Managers, said it has more than $200 million invested in the Nigerian equity market, with $10 million of that amount across its Africa funds in Lafarge, noting that the proposed deal is unfavorable to minority shareholders of the company.

The Fund raised three points of concern relating in particular to pricing and valuation, suggesting that these have been skewed against minority shareholders in Nigeria in particular.

“The price being paid by Lafarge WAPCO of N215.3billion ($1.35billion) for incremental earnings of N10.3billion, implies a price earnings multiple of 20.9x for the acquired assets, while Lafarge Wapco currently trades on a 12.5x multiple,” Coronation stated in a letter sent to BusinessDay.

It noted that, “by issuing shares at a rating that is 67% lower than the rating on the acquired assets, minority shareholders are greatly prejudiced.” It complained about the basis of arriving at a higher valuation for the South African assets, a market it said was ‘slow growing and in a mature market.’

“Of the $1.35billion deal, 60% relates to the South Africa assets. These assets are slow growing and operate in a mature market. Lafarge S.A are looking to sell their SA assets in exchange for shares in Lafarge WAPCO, an undervalued, high growth company operating in one of the most attractive cement markets on the continent. Lafarge S.A will have increased their shareholding in Lafarge WAPCO from 60% to 73% following the deal at the expense of minority shareholders,” Coronation explained.