Pradeep Paunrana, the ex-chief executive and ex-major shareholder of Athi River Mining (ARM) Cement Plc, has renewed the court battle where he sought to stop the sale of the embattled ARM Cement company.
This renewed battle comes after he successfully lodged an appeal petition seeking to block the purchase of this company by Narendra Naval’s National Cement. National Cement is a subsidiary of Devki Group. Devki Group is a family owned conglomerate that has various business interests in cement, steel products, roofing sheets and aviation.
In the appeal Mr. Paunrana, an associate of Jaswant Singh Rai -chairman of West Kenya Sugar- , wants the court to consider a bid to buy the ARM Cement Plc from a consortia that includes Mr Rai’s Rai Cement Company.
In the 2000 paged appeal lodged, Mr. Paunrana has faulted the High Court judgement issued on September 27, 2019 by Justice Mary Kasango. The judgment had dismissed a case in which Mr. Paunrana filed to stop the acquisition of the ARM Cement by National Cement Company. The judgement consequently paved way for the conclusion of the transaction commercially valued at $50 million.
The High Court judgement dismissed the application on the basis that it was misconceived and lacked merit. The High Court judgement had also cleared the sale and acquisition of ARM Cement arguing that Mr. Rai was not part of the court process challenging the sale of the company. The court also averred that Mr Rai’s late inclusion in the Ksh. 6.5 billion offer had introduced ‘hidden clauses that the court was not privy to.
National Cement through Mr. Raval, had entered into an agreement to acquire ARM Cement in May. However, through the backing of Mr. Rai, the transaction had been halted by a court of law on conditions that the administrators were at liberty to determine whether the bank guarantee met their requirements for the sale of the company and that Mr. Paunrana could provide a guarantee equivalent to 20 percent of the bid price ($61.8m).
Since August 2018 ARM cement had been on administration by Pricewater house Coopers (PwC) over debts amounting to $190 million. In September 2019, PwC rejected a bank guarantee amounting to Ksh 1.3 billion on basis that it was presented on the strength of Mr. Rai whom the consultancy firm considered a stranger in the bidding process.
ARM Cement is Kenya’s second biggest cement producer. Mr. Paurana had sued to block the sale of the company through an auction after the banks which gave the company a $300m loan placed it under administration. In his application he argued that the banks ignored his offer of Ksh 6.5 billion which was Ksh. 1.5 billion more than the National Cement offer.
However, in the appeal petition, Mr Paurana wants to halt this acquisition arguing that National Cement executives have already moved into ARM Cement premises albeit the Competition Authority is yet to approve of the acquisition.
“The respondents are already proceeding to irregularly hand over management of ARM to NCC, who are directing aspects of the management and issuing orders to staff,” read part of the appeal petition.
Furthermore, through his lawyers, Mr. Paunrana argues that the sale of ARM Cement to National Cement would occasion him irreparable loss and damage as he had inherited the company from his father, Harjivandas Paunrana.
Intricacies from a sworn affidavit by Muniu Thoiti, an administrator of the company, revealed that Mr. Paunrana had failed to meet the April 4, 2019 deadline to put in a bid after expressing interest in the asset auction. Nonetheless, he submitted a late bid on May 17 under a consortium with Mr. Rai. Furthermore, the alleged 6.5 billion offer had been submitted one hour before the administrators had signed a deal with National Cement but had been rejected since the bid lacked proof of funding as it had only an expression of interest from Baraka fund which was promising to finance the bid. This offer also failed because the financier still needed due diligence, a process which had been concluded between October 2018 and March 2019.
Mr. Paunrana had earlier indicated that his family did not have money to participate in the transaction. Efforts of a joint bid with Aliko Dangote never materialized as Mr. Dangote placed his own bid of Ksh. 4.5 billion but lost to National Cement. Rai group had shown interest in ARM Cement ahead of bidding had never placed an offer.
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