BATTLE OF BILLIONAIRES FOR CONTROL OF ARM CEMENT TAKES A NEW TURN
The battle of billionaires for the control of ARM Cement took a new turn Wednesday after consultancy firm PriceWaterhouseCoopers (PwC) rejected a Sh1.3 billion bank guarantee by tycoon Jaswant Rai that the court demanded to stop the sale of the firm to industrialist Narendra Raval.
PwC, which is acting as ARM administrator, did not accept the guarantee equivalent to 20% of the Sh6.5 billion bid price from Rai and his associates on the deadline day of September 10 set by the Court.
The consultancy firm said that the guarantee from Rai failed to meet its terms. The decision has now set the stage for a vicious legal battle for control of ARM Cement — whose sale to National Cement Company for $50 million has been stopped by the court. Raval is the lead shareholder in National Cement.
The group had sought to stop the sale led by PwC, arguing that it offered Sh1.5 billion more to acquire ARM Cement but the consultancy firm rejected its offer, prompting the court battle for control of the listed cement firm that has run into financial troubles.
Documents show the guarantee was turned down because it expires in nine months, exposing the administrators if the court process drags on for longer. PwC was also concerned that the guarantee has not provided to cover costs and damages if the consortium loses the case.
“The guarantee is not issued by Pradipkumar Paunrana but by an entity referred to as the consortium which includes Jaswant Rai Group of Companies. Our client has well-founded concerns that inclusion of third parties who are not in court affects the quality and validity of the guarantees,” the rejection letter by Walker Kontos says.
But lawyers representing the consortium of Rai Group and Paunrana, former ARM chief executive and top owner, yesterday accused PwC of taking sides, arguing that terms of its guarantee were similar to that of National Cement.
The lawyers insisted that Rai was part of the consortium and believe the nine-month period covered by the Sh1.3 billion guarantee was similar to that of National Cement, arguing that attaching the cost of the suit to the bank cover was not part of the court order.
“We have firm instructions to move to court to protect our clients’ interest against your client’s unreasonable and irregular obstructions of the court order,” O&M law said.
ARM Cement was put under administration last August by some of its creditors over a Sh19 billion debt and its shares were suspended from the Nairobi Securities Exchange. It has debts with a range of creditors, including local commercial banks.
PwC has been accused of leaving on the table better offers compared to the Sh5 billion from National Cement.
In a court ruling last Thursday, Justice Mary Kasango gave PwC the powers to vet the guarantee which was key to influencing the sale of ARM. This is the power that the consultancy firm has used to reject the Sh1.3 billion guarantee from Diamond Trust Bank.
The court battle between Rai and his business rival, Raval has stalled the sale of ARM cement, whose receivership period lapsed on August 17.
The uncertainty has seen Stanbic Bank — which funds ARM Cement operations — threaten to freeze funding.
National Cement’s lawyer, Fred Ngatia, said the Rai Group was trying to use a court process to trample an existing contract. He accused the group having made a late submission after establishing the bid price offered by National Cement.https://www.businessdailyafrica.com/news/Billionaires-battle-for-control/539546-5269966-c9pn0kz/index.html
