The
battle of billionaires for the control of ARM Cement took a new turn Wednesday
after consultancy firm PriceWaterhouseCoopers (PwC) rejected a Sh1.3 billion
bank guarantee by tycoon Jaswant Rai that the court demanded to stop the sale
of the firm to industrialist Narendra Raval.
PwC,
which is acting as ARM administrator, did not accept the guarantee equivalent
to 20% of the Sh6.5 billion bid price from Rai and his associates on the deadline
day of September 10 set by the Court.
The
consultancy firm said that the guarantee from Rai failed to meet its terms. The
decision has now set the stage for a vicious legal battle for control of ARM
Cement — whose sale to National Cement Company for $50 million has been stopped
by the court. Raval is the lead shareholder in National Cement.
The group
had sought to stop the sale led by PwC, arguing that it offered Sh1.5 billion
more to acquire ARM Cement but the consultancy firm rejected its offer, prompting
the court battle for control of the listed cement firm that has run into
financial troubles.
Documents
show the guarantee was turned down because it expires in nine months, exposing
the administrators if the court process drags on for longer. PwC was also
concerned that the guarantee has not provided to cover costs and damages if the
consortium loses the case.
“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 and validity of the guarantees,” the rejection letter by
Walker Kontos says.
But
lawyers representing the consortium of Rai Group and Paunrana, former ARM chief
executive and top owner, yesterday accused PwC of taking sides, arguing that
terms of its guarantee were similar to that of National Cement.
The
lawyers insisted that Rai was part of the consortium and believe the nine-month
period covered by the Sh1.3 billion guarantee was similar to that of National
Cement, arguing that attaching the cost of the suit to the bank cover was not
part of the court order.
“We have
firm instructions to move to court to protect our clients’ interest against your
client’s unreasonable and irregular obstructions of the court order,” O&M
law said.
ARM
Cement was put under administration last August by some of its creditors over a
Sh19 billion debt and its shares were suspended from the Nairobi Securities
Exchange. It has debts with a range of creditors, including local commercial
banks.
PwC has
been accused of leaving on the table better offers compared to the Sh5 billion
from National Cement.
In a
court ruling last Thursday, Justice Mary Kasango gave PwC the powers to vet the
guarantee which was key to influencing the sale of ARM. This is the power that
the consultancy firm has used to reject the Sh1.3 billion guarantee from
Diamond Trust Bank.
The court
battle between Rai and his business rival, Raval has stalled the sale of ARM
cement, whose receivership period lapsed on August 17.
The
uncertainty has seen Stanbic Bank — which funds ARM Cement operations —
threaten to freeze funding.
National Cement’s lawyer, Fred Ngatia, said the Rai Group was trying to use a court process to trample an existing contract. He accused the group having made a late submission after establishing the bid price offered by National Cement.https://www.businessdailyafrica.com/news/Billionaires-battle-for-control/539546-5269966-c9pn0kz/index.html
