Bloomberg News

Holcim Stops PIC Bid to Convert Debt to Shares at Board Meeting

November 09, 2011

Nov. 7 (Bloomberg) -- Holcim Ltd. and its South African partner in Afrisam Ltd. voted against a proposal at a board meeting that would have allowed the Public Investment Corp. to convert debt into shares and gain control of the country’s second-largest cement producer.

The PIC, Africa’s largest pension fund manager, and former MTN Group Ltd. Chief Executive Officer Phuthuma Nhleko are bidding to convert debt they own in Afrisam into shares as interest repayments threaten Afrisam’s ability to continue operating. Holcim, the world’s second-largest cement producer, created Afrisam in 2006 by selling most of its South African business to black investors led by Bunker Hills Investments Ltd.

At a shareholder meeting today, Holcim and Bunker Hills “refused to honor their contractual obligation by voting against the resolution, which would have authorized Afrisam management to issue the ordinary shares required to effect the conversion,” the Pretoria-based PIC said in an e-mailed statement today. “As a result both Holcim and Bunker Hills are now in breach of the transaction agreements.”

Bunker Hills would “have been supporting what we believe is an illegitimate transaction” if it had voted in favor of the resolution, Peter Tshisevhe, a lawyer for Johannesburg-based investment company, said by phone. “They aren’t entitled to behave in the manner that they did.”

Christof Haessig, a director of Jona, Switzerland-based Holcim and its representative on the Afrisam board, didn’t immediately respond to requests for comment through the company’s lawyer.

Debt Conversion

Bunker Hills, which owns 37 percent of Afrisam, and Holcim, which retained a 15 percent stake, have said they oppose the debt conversion because it will dilute existing shareholders.

South Africa’s government is pushing companies from banks to mines to sell stakes to black investors to make up for discrimination during apartheid, which ended in 1994. Bunker Hills funded the acquisition, its only investment, with about 23 billion rand in debt, which it is struggling to repay after a recession crimped cement demand in Africa’s largest economy.

Afrisam management holds 13 percent of the company, while the PIC, which manages 1 trillion rand ($126 billion) in government-employee pensions, has 20 percent plus 4.7 billion rand in preference shares and community trusts hold the balance. Worldwide Africa Investment Holdings Ltd., of which Nhleko, who is black, is chairman, wants to convert the 3.7 billion rand it is owed into shares, the Johannesburg-based company, said last month.

‘Own Interests’

Bunker Hills and Holcim are “seeking to better their own interests at the expense of the remaining stakeholders,” the PIC said, adding that further delays may cause Afrisam to enter a process in which it is placed under temporary supervision and avoid claims while it restructures its liabilities.

“Already, these delays are having a negative impact on the operations of the company,” the PIC said, without giving more details. “The PIC will be pursuing all possible remedies to ensure that its rights are honored.”

The PIC expects Bunker Hills to “commit business suicide” by supporting the resolution, Tshisevhe said. “We’ve been trying to do our level best to act in the interests of the company.”

There was no “trigger event” that allows the PIC to redeem its debt, he said, declining to give details on what would allow the PIC to take the steps to convert its debt. Bunker Hills will ask the Pretoria-based North Gauteng High Court on Nov. 29 to make permanent an Oct. 31 interim order to prevent the PIC from attaching any Afrisam shares owned by Bunker Hills, Tshisevhe said.

--Editors: Peter Blumberg, Mary Romano

To contact the reporter on this story: Vernon Wessels in Johannesburg at vwessels@bloomberg.net

To contact the editors responsible for this story: Riad Hamade at rhamade@bloomberg.net


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