The High Court has stopped the sale of Athi River Mining Cement Company (ARM) to Devki Group of Companies’ National Cement.
This follows an objection by its former CEO Pradeep Paunrana who has 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.
“The offer letter did not provide any concrete proof of funding and what was provided was simply a conditional “Expression of Interest” that did not provide comfort and deal certainty, a critical consideration for the bidding process,” PricewaterhouseCoopers (PwC), the administrators of ARM, said in a letter dated May 29.
The court ordered that the transaction cannot be completed until further directions are issued next week.
“That in the meantime as the respondents carry out their mandate under the administration order, they shall not execute/complete sale documents and/or transfer, sell the shares/assets of the company until hearing and determination of the instant application,” ordered the court.
Also, according to PwC, Mr Paunrana’s bid was received on May 17, more than a month after the April 5 deadline for submission of bids.
“The purported asset purchase agreement between the respondent and National Cement had not been signed by the time the aforesaid consortium offer had been received by the respondents and there is no credible justification for the acceptance by the respondents of the National Cement bid prior to execution of the agreement, which bid fell a whole $15 million below the consortium’s bid,” argued Mr Paunrana’s lawyers.
Mr Paunrana and his team had offered Ksh6.5 billion for the Kenyan assets and operations of ARM.