Production data corroborates validity of proposed cement takeover megadeal
The proposed takeover of majority shares of Tanga Cement by Twiga Cement will not create a cement behemoth that will monopolise the domestic market beyond the allowed threshold for fair competition as set about by regulations, analysis of production data of cement in Tanzania shows.
Of recent, there have been buzz and conflicting pro-merger and anti-merger comments from stakeholders and industry insiders that the transaction could threaten healthy competition in the country, a stance that has so far been liquidated by the Minister for Investment, Industry and Trade Dr. Ashantu Kijaji.
In an official speech to clear the air, Dr. Kijaji had made it clear that the government had conducted due diligence on the market effects of the acquisition application before green- lighting it, and concluded that an takeover was legal, a statement that is now empirically corroborate by market data.
According to production data available, Twiga Cement has an annual production of 2,100,000
metric tons, which translates to 19 percent market share. On the other hand, Tanga Cement churns out 1,200,000 metric tons yearly and controls 11 per cent of the market.
The combined output of the new corporate entity resulting from the proposed takeover will amount to 30 per cent share of the market, which is 5 percentage points below the 35-percent ceiling set by regulations, rending doubts from pessimists unfounded.
The takeover was jointly announced on October 2021 by Scancem International DA (Scancem), a subsidiary of Heidelberg Cement AG, which owns Twiga Cement, and AfriSam Mauritius Investment Holdings Limited, owner of Tanga Cement, that they had finalised the terms upon which the former would acquire 68.33 percent of shareholding in Tanga Cement.
The Sh137.33 billion megadeal, which had been under examination by the Fair Competition Commission (FCC) and the Tanzania Mining Commission (TMC), had stirred worries among operators in the industry who claim it would amount to breach Tanzania’s competition laws.
Examination of the statutory basis for controlling the size of market share of a company, enshrined in the Fair Competition Commission Act, 2018, Article 11(2) of the said Act’s regulations, and Article 1(2) – which set the criteria for merger- shows that the proposed application is within the law.
