Bamburi Cement and The Thinking Behind Its $180M Sale to Amsons Group

Why did Edha Nahdi, MD of Amsonsgroup , risk USD 180 million on Bamburi Cement PLC ?

As 拉法基 —Bamburi’s global parent company—exits the region, what made this deal irresistible to Amsons Group?

Finalized on December 5, 2024, this acquisition marks one of East Africa’s most impactful corporate moves in recent years. Despite Holcim pulling back from the region, Amsons is boldly stepping in, betting big on Bamburi’s potential.

But what drives this decision to take on such a significant risk?

In this article, we take a deep dive into the acquisition by breaking it down into the following key areas:

1. A Summary of the Acquisition in 5 Points (The TL;DR version)
2. Why This Deal Matters for East Africa
3. A Brief History of Amson’s Group
4. Strategic Drivers Behind Holcim’s Exit vs. Amsons Entry
5. Financing, Valuation, and Financial Outlook
6. The Battle for East Africa’s Cement Market
7. Key Risks Threatening the Acquisition
8. 3 Reasons Why This Acquisition is a Regional Victory
9. 3 Concerns Linked to this Acquisition
10. Implications for East African Infrastructure
11. Final Thoughts

A SUMMARY OF THE ACQUISITION IN 5 POINTS

1. The Deal:

Amsons Group, a Tanzanian conglomerate led by Managing Director Edha Nahdi, announced in July 2024 its plans to acquire Bamburi Cement for KSh 65 per share (~$180 million). The offer represents a 42.39% premium over Bamburi’s share price at the time of the announcement.

2. Strategic Goals:

• Enhance Amsons’ regional market presence and expand production capacity. With a combined annual output of 5.3 metric tonnes, the company solidifies its position as a leading producer in the region.
• Develop a new clinker and cement plant in Tanga, Tanzania, with a 5,000-ton daily capacity.
• Upgrade Mbeya Cement factory to enhance competitiveness.

3. Financial Terms:

• A breakup fee of Ksh682.7 million (~$5.31 million) is proposed if the deal does not proceed by November 2025.
• If 75% shareholder acceptance is achieved, Bamburi will be delisted from the Nairobi Securities Exchange.

4. Bamburi’s Current Status:

• Posted a net loss of Ksh399 million in 2023, mainly due to the sale of Hima Cement in March 2024 to a consortium of Sarrai Group and Rwimi Holdings.
• Improved operational cash flow to Ksh2.896 billion through effective working capital management.

5. Expected Impact:

• The acquisition is anticipated to stabilize and potentially revitalize Bamburi’s financial position.
• Delisting from the Nairobi Securities Exchange would signal a significant operational shift, providing Amsons with more control over Bamburi’s future strategy.
• Potential ripple effects on the East African construction and cement industries, including market realignment and increased competition.

WHY THIS ACQUISITION MATTERS FOR EAST AFRICA

This acquisition is particularly important because it highlights the growing role of local firms in the economic and infrastructure development of the region.

The East African population is growing quickly, and according to this report from leading Market Research firm imarc, there is rising demand for cement due to urbanization and industrialization. This makes the cement industry vital to the region’s economic growth.

Yet, the region also faces challenges, including strained infrastructure and the need for sustainable development.

As multinational companies like Holcim reduce their presence, local players such as Amsons have a unique opportunity to drive growth and shape the future of East Africa’s infrastructure and economy.

A BRIEF HISTORY OF AMSONS GROUP

To understand the strategic importance of this acquisition, it is helpful to take a closer look at the company behind the deal: Amsons Group.

The family-owned company, founded in 2000, is based in Tanzania. It has diversified interests in oil and gas, cement, real estate, and other areas.

Under the leadership of its MD Edha Nahdi, it has grown into one of East Africa’s largest privately held firms, employing over 10,000 people and generating annual revenues exceeding $1 billion.

The group’s portfolio includes renowned brands like Camel Oil, Camel Cement, and Camel Flour, with operations in Tanzania, Malawi, the DRC, and Mozambique.

Amsons’ decision to target Bamburi Cement aligns with its ambition to expand and solidify its presence across East Africa, particularly in key markets like Kenya.

Bamburi has a strong presence and a good reputation in the market. This acquisition gives Amsons a chance to increase its revenue and take advantage of opportunities with its existing brands in Tanzania.

STRATEGIC DRIVERS BEHIND HOLCIM’S EXIT VS. AMSONS ENTRY

Now that we better understand Amsons' context, let’s examine the strategic actors behind both Holcim’s exit from East Africa and Amsons’ entry.

1. Why Holcim Exited

According to this Business Insider Africa report, Holcim’s decision to sell Bamburi fits with its global plan to simplify operations and focus on markets that offer better growth and profit opportunities.

The company has been shedding non-core assets in regions with intense competition or operational inefficiencies. Since 2018, they have exited 15 African markets, selling more than 20 of its subsidiaries, including this recent sale of its nearly 84% stake in its Nigerian unit to Huaxin Cement as reported by The Kenyan Wall Street .

Key Strategic Drivers for Holcim’s Exit:

1. The company is focusing on advanced and sustainable construction solutions, which allows it to meet increasing demand for environmentally-friendly products and gain a competitive edge. Africa's market is not yet fully equipped to support these innovations.
2. They are prioritizing fast-growing markets in Asia and the Middle East, tapping into high-growth regions with significant demand for construction materials and infrastructure development. Compared to these regions, Africa's infrastructure growth remains slower.
3. They are selling off smaller markets to focus on their main assets, allowing them to streamline operations and reduce costs. Africa's fragmented markets hinder profitability.

2. Why Amsons Bought Bamburi

This acquisition increases Amsons’ annual production capacity from 2.19 million to a combined 5.39 million metric tonnes, reinforcing its status as a regional production powerhouse.

For Tanzanian-based Amsons Group, this acquisition marks a significant step in its ambition to become a leading force in East Africa’s construction industry.

The construction boom in Kenya—fueled by urbanization, infrastructure projects, and housing demand—presents significant opportunities. By acquiring Bamburi Cement, Amsons gains production capacity, a strong distribution network, and brand recognition in a key regional market.

Key Strategic Drivers for Amsons Entry:

1. The acquisition of Bamburi Cement boosts Amsons' annual production capacity to 5.39 million metric tonnes; combining Amsons' 2.19 million with Bamburi's 3.2 million. This major increase strengthens Amsons' ability to meet growing demand and positions them as a regional production leader.
2. The company is expanding its presence in Kenya, a key economic hub, which opens up access to a rapidly growing market and more business opportunities.
3. They are leveraging expertise from their Tanzanian brands, Camel Cement and Tembo Cement, which boosts operational efficiency and strengthens their regional expertise.
4. They are aligning with Kenya’s Vision 2030 and other major infrastructure projects, positioning themselves as key players in the country's long-term development and infrastructure growth so they can attract bigger deals.

FINANCING, VALUATION, AND FINANCIAL OUTLOOK

Understanding the financial mechanics of this deal starts with examining how the company ?financed the $180 million acquisition.

In this section, we analyze the financial structure of the buyout based on insights from the bid papers submitted by Amsons Group.

We will:

• Examine how the deal was financed
• Analyze how the valuation was calculated
• Assess the financial outlook, including ROI and revenue projections

1. Financing the Deal

Amsons financed its acquisition of Bamburi Cement using a mix of credit facilities and internal shareholder resources, demonstrating a well-coordinated financial approach. The total acquisition cost was KES 23.6 billion (approximately $180 million), funded as follows:

• Credit Lines: Secured approved facilities from its principal banker.
• Shareholder Advances: Amsons Industries Tanzania, the majority shareholder, provided current account advances to bolster the transaction.

A Sponsoring Stockbroker confirmed that Amsons had the necessary cash flow and standby credit to complete the acquisition entirely in cash—avoiding share swaps and reinforcing its commitment to the deal.

This strategy not only secured ownership but also safeguarded shareholder equity, highlighting Amsons’ focus on financial stability and growth.

2. Calculating the valuation

Bamburi Cement's valuation was based on common industry methods to make sure the offer was fair and competitive.

These methods included:

• Discounted Cash Flow (DCF): Estimating Bamburi’s future cash flows and discounting them to present value using a risk-adjusted rate provided a clear view of its intrinsic worth.
• Relative Valuation: Comparing Bamburi’s financials to similar cement industry transactions helped determine an appropriate valuation using metrics like price-to-earnings and price-to-revenue ratios.
• Volume-Weighted Average Price (VWAP) & Premium: By analyzing Bamburi’s stock price trends, Amsons applied a premium reflecting its market position, growth potential, and strategic importance. This premium was attractive to Bamburi shareholders while aligning with Amsons’ expansion goals.

Together, these valuation techniques ensured that Amsons paid a fair price while securing a critical asset for its long-term growth in East Africa’s cement industry.

3. Financial Outlook

For Amsons, the $180 million acquisition price represents a calculated investment in future profitability.

Let’s break down the financial dynamics driving this decision:

• Revenue Potential: According to this report from Business Wire, the Kenyan cement industry is projected to grow by 3.5% annually, reaching $2.20 billion in 2024. Bamburi’s production capacity, supported by its plants in Mombasa and Nairobi, positions it well to capitalize on this growth. Over the medium to long term, the industry’s compound annual growth rate (CAGR) of 3.6% from 2024 to 2028 will likely boost cement output from $2.12 billion in 2023 to $2.53 billion by 2028.
• Valuation Premium: Amsons offered a 42.39% premium over Bamburi’s share price. This decision ensured shareholder approval while signalling Amsons’ commitment to driving long-term growth and adding strategic value to its portfolio.
• Debt and Cash Flow: Bamburi’s strong cash flow and manageable debt levels make it an attractive acquisition target, especially for a cash-rich conglomerate like Amsons. The financial stability of Bamburi reduces risk and provides a solid foundation for future investments.
• Return on Investment (ROI): By leveraging synergies and improving operational efficiencies, Amsons likely anticipates a double-digit ROI over the next 5 to 7 years. This level of return is based on assumptions such as improving operational performance, capturing value from Bamburi’s assets, and aligning the acquisition with Amsons’ growth ambitions.

THE BATTLE FOR EAST AFRICA’S CEMENT MARKET

Amsons Group is entering a highly competitive regional cement market, where both local and international companies are vying for market share. With increasing demand and expanding production capacities, the competition is fierce.

Bamburi Cement is the region's largest cement producer, with a an annual production capacity of 3.2 million metric tonnes and a market share of 32.6%. The second-largest player is Mombasa Cement, with a 15.8% market share.

The market is highly competitive, with numerous players vying for dominance, and the acquisition could further shift these dynamics. These players, alongside smaller regional firms and imported cement products, will require Bamburi's management to develop strong strategies for maintaining its market leadership.

Amsons Group will face strong competition from several key players, including:

1. Mombasa Cement Ltd (MCL): 15.8% market share

MCL is a the second largest cement producer in Kenya. They are headquartered in Mombasa, with manufacturing plants in Athi River and Vipingo. The company has an annual production capacity of 5.6 million metric tonnes and markets its products under the NYUMBA brand.

2. East Africa Portland Cement Company (EAPCC): 15.1% market share

EAPCC is one of the region’s legacy brands, boasting a loyal customer base and significant name recognition. The company's Athi River plant is currently operating at 50% capacity after a Sh400 million refurbishment. The plant's production capacity was previously 310,000 tonnes per year.?The company has plans to increase its cement production capacity to one million metric tonnes per year by 2026.

However, despite its history, the company is struggling financially and grappling with operational inefficiencies that threaten its position in the market.

3. Savannah Cement Limited (SCL): 15.0% market share

SCL, based in Athi-River, Kenya, has an annual production capacity of 2.4 million tonnes, the company was commissioned in 2012 and expanded its capacity in 2020. Savannah Cement’s products are used in various construction applications. However, in 2023, it was placed under administration due to a Sh10 billion debt and is now preparing to sell assets to repay creditors.

KEY RISKS THREATENING THE ACQUISITION

Of course, no acquisition is without its risks. Despite Amsons Group's strong financial backing, several challenges lie ahead.

In the case of Bamburi Cement’s sale, understanding the risks involved is essential to evaluating the acquisition’s potential for success and its broader impact on the company’s regional ambitions.

Key risks include:

1. Integration Challenges:

The transition from Holcim’s global management style to Amsons’ local, family-owned approach may face operational hurdles. Aligning Bamburi’s corporate culture, processes, and workforce with Amsons’ values is essential to minimize disruptions and ensure productivity.

2. Intense Market Competition:

East Africa’s cement market is highly competitive, with major players like Mombasa Cement and Devki Group’s National Cement. Amsons must not only maintain Bamburi’s customer base but also find ways to stand out from competitors to avoid market share loss.

3. Currency Fluctuations:

Exchange rate volatility between the Tanzanian Shilling and Kenyan Shilling could affect profitability. Hedging strategies may be necessary to mitigate potential impacts on revenue and costs.

4. Regulatory and Political Risk:

East Africa’s regulatory landscape is complex and unpredictable. Changes in government policies, tax regimes, or trade agreements, along with political instability, could threaten operational continuity and profitability.

5. Supply Chain Vulnerabilities:

Cement production relies on raw materials like limestone and fuel, which are subject to price volatility. Securing a stable supply chain is crucial to minimize disruptions and cost fluctuations.

6. Financial Strain:

The $182 million acquisition represents a significant investment, creating short-term financial pressures. Amsons’ broader portfolio, including its Tanzanian operations, must withstand these costs, particularly during the integration phase.

3 REASONS WHY THIS ACQUISITION IS A REGIONAL VICTORY

According to the below report from leading newswire distribution firm Business Wire, the East African region is undergoing rapid urbanization and industrialization, driving unprecedented demand for construction materials like cement.

With countries such as Kenya and Tanzania leading the charge, the cement industry plays a central role in powering this growth.

Amsons' acquisition of Bamburi Cement not only strengthens its position in Kenya’s cement market but also signals a turning point. Local ownership of such critical assets means more economic gain stays within East Africa, empowering the region to control its own development and capitalize on the growth opportunities ahead.

Here are three main reasons why this acquisition is a win for locals:

1. Strengthened Local Leadership

The acquisition puts control of a key resource in the hands of a local company, Amsons, which is deeply familiar with the region's needs. This local leadership is crucial for driving development that is tailored to the specific economic and social context of East Africa, rather than being influenced by external, multinational priorities.

2. Increased Economic Independence

By taking ownership of Bamburi Cement, a major cement producer, Amsons strengthens East Africa's economic independence. This reduces reliance on multinational corporations (like Holcim) and ensures that key industries remain in the hands of companies that prioritize regional growth and stability.

3. Efficient Resource Allocation

Amsons is in a better position to manage cement production and distribution to meet the growing demands of the region’s infrastructure boom. By localizing production, the company can help ensure that resources are used more efficiently and that projects are completed on time, which is critical for the region's long-term development.

3 CONCERNS LINKED TO THE ACQUISITION

Multinational corporations, while driven by profit, often bring expertise, international standards, and extensive resources that can help stabilize markets, ensure consistent product quality, and maintain a level of competitiveness.

While Amsons’ acquisition of Bamburi Cement offers significant potential for regional growth, there are concerns associated with such a large shift in local ownership.

1. Risk of Monopoly or Reduced Competition

Likelihood: Moderate.

Consolidation in industries like cement often leads to reduced competition. For example, East African Portland Cement, historically backed by the Kenyan government, held a monopoly on cement production until privatization in the late 1990s and early 2000s, when competition began to increase.

With the acquisition of Bamburi Cement, Amsons' combined annual production capacity increases to 5.39 million metric tonnes, further solidifying their dominance in the market. This increased market share could lead to reduced competition, driving up prices, slowing infrastructure projects, and raising costs for developers and governments.

Public reaction to the transaction has been mixed, with critics raising concerns about the potential for monopolistic behavior that could harm consumers and stifle competition.

2. Job Security and Strain on Local Management

Likelihood: Moderate.

Transitioning from multinational to local ownership often strains financial and operational capacity, especially for rapidly expanding companies.

If the company faces financial strain, it may resort to cost-cutting measures, which could lead to job losses or disruptions in the workforce.

Additionally, there is a concern for the region because overextending Amsons' financial and operational capacity could create broader economic vulnerabilities. If Amsons directs too many resources toward cement production at the expense of other sectors, the region risks becoming overly dependent on one industry.

A single-industry focus might also make the region more susceptible to market shocks, such as fluctuations in cement demand or prices, further destabilizing the local economy.

3. Environmental Concerns

Likelihood: Moderate to High.

Historically, smaller or local companies often struggle with implementing stringent environmental safeguards. For instance, smaller mining and construction firms in Tanzania have faced criticism for prioritizing growth over sustainability.

Without the resources or incentives of a multinational, Amsons might struggle to maintain sustainable production practices, potentially leading to higher environmental degradation.

IMPLICATIONS FOR THE EAST AFRICAN CONSTRUCTION INDUSTRY

With such a significant transaction unfolding, it’s important to consider the broader implications for the East African construction industry.

The impact of this deal could extend beyond the cement market, influencing the entire construction sector in East Africa. By reshaping market dynamics, investor sentiment, and the long-term growth trajectory, this deal could have significant implications for both local projects and larger infrastructure developments.

Here’s a look at the potential short-term and long-term impacts.

Short-Term Impact:

• Market Changes: Competitors may take advantage of Bamburi’s change in ownership by offering lower prices or positioning themselves as more reliable, which could lead to more competition and innovation.
• Investor Confidence: The sale and possible removal of Bamburi from the stock market might cause temporary concerns among investors. However, if Amsons’ plan works, it could boost investor confidence and create new opportunities.
• Delays in Projects: Changes in ownership and production may cause delays in projects that depend on Bamburi cement, forcing developers to find other suppliers.

Long-Term Outlook:

• Regional Growth: Amsons could focus more on growing Bamburi’s presence in countries like Kenya, Uganda, Tanzania, and Rwanda, which will help meet the increasing demand for construction projects.
• Consolidation in the Industry: This acquisition could lead to more mergers and takeovers, making the market more concentrated with bigger companies controlling more of the market.
• Infrastructure Investment: With more focus on infrastructure, Bamburi could help speed up large projects like roads and bridges and play a bigger role in working with governments on public-private partnerships.

Overall, this deal could change the cement market and help drive growth and innovation in East Africa’s construction and infrastructure sectors.

FINAL THOUGHTS

The sale of Bamburi Cement is a corporate transaction that represents a turning point for East Africa’s construction landscape.

Holcim’s strategic exit signals a shift in global priorities, while Amsons Group’s entry as a local leader brings fresh energy to the table. This transition holds the potential to reshape the region’s cement market and beyond.

For Amsons, this acquisition is a declaration of confidence in East Africa's construction future. By taking over from a global heavyweight like Holcim, the family-led company is positioning itself as a key regional player ready to lead in an industry ripe for growth.

This is also a broader reflection of the growing influence of local businesses in East Africa, with family-driven companies stepping up to play a larger role in regional development.

The implications for the construction sector are significant. As the industry consolidates and competition heats up, success will hinge on forming strategic partnerships, meeting evolving market needs, and driving innovation.

Amsons’ journey could serve as a blueprint for other businesses aiming to dominate East Africa’s thriving construction industry.

P.S.

?I’m fascinated by how strategy, marketing, and finance intersect in the engineering and construction world. If this is also your thing, follow me so we can geek out together.