Experts believe the merging of South Africa’s two largest cement producers —PPC and Afrisam —does not make Business sense.

Following a SENS announcement, in December, on a non-binding merger proposal from the AfriSam group to PPC, many industry experts have come forward to raise their concerns.

A merger between the largest (PPC) and second-largest (Afrisam) cement producers would create an entity with just under 60% of the South African market which would raise considerable competition concern, reports BDLive.

According to a report by BDLive former PPC CEO Paul Stuiver said that some members of the PPC board had wanted to do this deal since 2010.

Stuiver said at the time it was decided that a merger produced no value for PPC shareholders, but some board members continued to push for it.

Since then it would appear that not much has changed as Charl Kocks, principal of Ratings Afrika, echoed this sentiment in a recent interview with MoneyWeb when he said there is no clear strategic reason for PPC shareholders to support the merger.

“AfriSam’s current debt position is unclear and it does not make sense for PPC to become an even bigger player in the stagnant South African market by merging with one of its biggest competitors,” he said.

The role of Public Investment Corporation (PIC) in the merger has also come into question.

The PIC, which has poured several billions into Afrisam since the failed BEE buyout in 2007 and holds 66% of the company and 12.57% of PPC, is keen to put the two companies together and create a national cement champ, BDLive reports.

However Kocks urges PPC shareholders to study the proposal very carefully to ensure they do not burn their fingers on AfriSam as the PIC has.