Foreign investor to inject Sh12.8b into ARM

Kenya’s second largest cement maker ARM Cement Ltd is eyeing a US$125 million (Sh12.8 billion) investment from an international institutional investor should the ongoing negotiations succeed.

ARM, the makers of Rhino Cement, said details of the deal, under which a foreign investor is expected to make multi-billion equity investment in the NSE-listed cement company, will be made available to the shareholders and the public soon.

“ARM Cement is currently in discussions with an international investor who intends to make an investment of up to $125 million equity investment in the company through convertible preference shares,” said the company in a statement.

The announcement may signal a departure from its earlier announcement that it would use a five-year private bond to raise up to $105 million (Sh10.7 billion). Convertible preference shares, or simply preferred stock, come with a number of advantages to the issuing company. Their lack of voting rights to the shareholder saves the company from dilution of its ownership.

And since they come with lower risk, the cost of raising capital through such shares is also lower compared to that of companies using ordinary stock, also called common stock. The company’s proposed investment shall be subject to several conditions such as regulatory and shareholder approvals.

In September, ARM posted a pretax loss of Sh645 million for the nine months to September 2015. Its short-term debts moved to Sh14.4 billion in the same period, translating to a 35 per cent rise compared to a similar period in 2014.

In October last year, the company announced an ambitious plan to expand across East Africa to compete effectively with its peers including construction of a 2.5 million tonnes per year integrated clinker and cement plant in Kitui County. In line with the Capital Markets Authority 2002 regulations, the company has advised the current and prospective shareholders to exercise caution when dealing in the share of the company.