The merger is expected to create a formidable cement player.
“The transaction itself does not make a strategic sense as [DATA PPC:PPC Ltd ]would be more interested in large exposure to the rest of the continent than the South African market,” Charl Kocks, principal at Ratings Afrika told CNBC Africa.
(READ MORE: PPC receives merger proposal from AfriSam)
“The South African cement market is not necessarily booming as we have four large companies and a possible entrant soon and maybe the sixth through the Chinese, so why would one want to be large in the market where you are not growing as you want to,” quizzed Kocks.
Kocks also questioned Public Iinvestment Corporation‘s (PIC) involvement in the deal saying answers were needed.
“What has been PIC’s role in the Afrisam and PPC transaction, to what extent does an old board give a commitment that they will be taking this deal forward and to what extent will the new board decide if they want to move forward with the transaction or not,” he said.
“When the whole fight started at PPC, PIC was quick to come forward to say we have full confidence on the board. We who watch directors carefully and watch shareholders carefully realised it was a fast response."
Previously PIC made an investment into AfriSam that was later proven to not have been a wise move in terms of the company’s performance as a number of things went wrong.
An investment into a good performing company like PPC would exonerate PPC’s decision largely viewed to have been a failure.
“PPC is a very good company and has been for many years,” said Kocks.
“It does not feel right that in all the struggles that PPC has gone through and possibly a new board in two weeks, a transaction like that comes up. That might have been [granted green light] by the previous board. We do not have enough information to be able to take a strong view. We are raising questions because we need them answered.”