Tycoon Jaswant Rai’s bid to freeze the sale of cash strapped Athi River Mining Company to National Cement Company has flopped, following a rejection by the company’s administrator PriceWaterhouseCoopers (PwC) of their bank guarantee.
Rai and his associates had placed a Ksh1.3 billion bank guarantee ordered by the court to stop the sale, where the National Cement Company owned by Narendra Raval had offered Ksh5 billion.
Former CEO Pradeep Paunrana moved to court saying that the company (ARM) had been undervalued in the Ksh5 billion buyout deal.
Paunrana is a significant shareholder in the company, and had initially in partnership with other investors offered to buy ARM but their bid was rejected for lack of proof of funds among other reasons. They had offered to buy the company at Ksh6.5 billion.
They were ordered to place the guarantee by September 10, but PwC said that the guarantee did not meet its terms, since it expires in nine months, and could expose the administrators in case litigation took longer. The guarantee did not also cater for costs and damages.
“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 of and validity of the guarantees,” reads the rejection letter from PwC as quoted by Business Daily.
However, the consortium argues that their guarantee is similar to that of National Cement, and accused PwC of taking sides in a bid to obstruct the court order.
ARM was placed under administration last year over a Ksh19.2 billion debt and its shares were suspended from the Nairobi Securities Exchange (NSE).
Muniu Thoithi and George Weru of PricewaterhouseCoopers Limited were appointed as joint administrators of the Company with the objective of the administration including maintaining the Company as a going concern or achieving a better outcome for the Company’s creditors.
ARM Cement currently has operations in Kenya, Tanzania, and Rwanda.
National Cement Company commenced operations in 2010, and produces and supplies cement under the brand name Simba Cement. It is a member of Raval’s Devki Group, owned by Narendra.