SGX-ST rejects International Cement's planned purchase of African firm for $141.45m

The proposed acquisition failed to meet the requirements of a VSA under rule 1015(2).

The Singapore Exchange (SGX) has rejected cement producer International Cement Group’s (ICG) proposed acquisition of SCHWENK Namibia for $141.45m (US$104.41m), a filing with the local bourse revealed.

After the Singapore Exchange Securities Trading (SGX-ST) classified the proposed acquisition as a ‘very substantial acquisition’ (VSA) under Chapter 10 of the listing manual, the buy was subject to the approval of the market regulator and shareholders of ICG.

However, ICG was informed that the SGX-ST is unable to approve the proposed acquisition after failing to meet the requirements of a VSA under rule 1015(2).

In a later announcement, the SGX-ST clarified its decision to reject the buy, on the basis that the target business was not profitable and that ICG did not have sufficient cash resources to fund the purchase consideration.

“SGX-ST noted that the foreign exchange losses arising from the SCHWENK loan claim remain in the pro forma financial statements after the proposed acquisition. As the SCHWENK loan claim remains and will continue to affect the accounts of the enlarged group after the acquisition, SGX-ST was of the view that the proposed acquisition is not able to satisfy rule 1015(2) which requires the target business to be profitable,” the market regulator noted.

ICG announced in early March its proposed acquisition for the construction materials producer from SCHWENK Zement International Gmbh & Co Kg. The total purchase consideration comprised $26.20m (US$19.34m) for all the sale shares and $115.22m (US$85.07m) for the shareholders’ loan.

The proposed acquisition was said to represent an attractive opportunity for the group to expand and quickly establish a foothold in Africa and seize growing business opportunities in the continent arising from the building and construction of infrastructure generated from the Belt and Road initiative (BRI) in China.

“Following the company’s successful diversification into the cement business in Central Asia in 2017, the company has decided to expand its cement business into Africa,” ICG explained in its previous announcement. “As compared to a new cement plant to be constructed by the group, a completed and commercially operational cement plant will obviate the need for the group to undertake project risk during the construction period.”

As a consequence of the SGX-ST’s decision, the draft of the shareholders’ circular, which was submitted to the market regulator for approval prior to an extraordinary general meeting (EGM) for shareholders’ approval for the proposed acquisition, was also rejected.