Asset-Stripping Concerns Cast Shadow Over Tanzanian Tycoon’s EAPC Acquisition

Nairobi — The blocked acquisition of East African Portland Cement Company (EAPC) by Tanzanian industrialist Edhah Abdallah Munif has exposed critical vulnerabilities in Kenya’s foreign investment oversight framework, raising fundamental questions about asset protection and market consolidation in the region’s cement sector.

Kenyan parliamentarians have intervened to halt the proposed Sh718.7 million deal, which would have seen Munif acquire a 29.2 per cent stake in EAPC from Swiss multinational Holcim at Sh27.30 per share — representing a significant discount to the market price of Sh56 per share at the time of the intervention.

The transaction, structured through Munif’s Nairobi-registered investment vehicle Kalahari Cement Limited, would have consolidated his position as EAPC’s largest shareholder, building on Bamburi Cement’s existing 12.5 per cent holding.

This vertical integration strategy has prompted concerns about market concentration and potential asset-stripping activities.

Debt Burden Drives Acquisition Strategy

Analysis of Munif’s recent corporate activities reveals a pattern consistent with debt-driven asset acquisition rather than organic growth investment.

Following his Sh23.6 billion leveraged acquisition of Bamburi Cement in December 2024, the company reported a substantial net loss of Sh905 million for the financial year ended December 2024, attributed primarily to foreign exchange losses linked to the divestiture of its Ugandan operations.

Industry sources familiar with Bamburi’s financial position indicate the company faces monthly debt servicing obligations exceeding Sh300 million, necessitating aggressive asset monetisation strategies.

The company has reportedly initiated the disposal of prime land holdings in Mombasa to manage its debt burden, a pattern that raises concerns about the intended treatment of EAPC’s substantial 909-acre property portfolio in Athi River.

The acquisition timing coincides with EAPC’s operational turnaround, with management reporting improved financial performance and share price appreciation from Sh4 to Sh60 over a ten-month period.

This recovery narrative makes the deeply discounted acquisition offer particularly contentious among shareholders and regulatory observers.

Regulatory Compliance Gaps

Parliamentary testimony from the Attorney General’s office identified significant procedural deficiencies in the proposed transaction, citing non-compliance with the Companies Act 2015 and EAPC’s Articles of Association.

These findings highlight broader systemic issues in cross-border investment oversight, particularly regarding transactions involving strategic industrial assets.

The Capital Markets Authority and the Competition Authority of Kenya face pressure to strengthen their assessment frameworks for foreign acquisitions, particularly those involving distressed buyers with substantial leverage positions.

The EAPC case has become a litmus test for regulatory effectiveness in protecting strategic national assets from opportunistic acquisition strategies.

Market Concentration Concerns

Munif’s expansion strategy reflects broader consolidation trends in East Africa’s cement sector, where Tanzanian industrial groups are systematically acquiring assets across the region despite diplomatic tensions between Nairobi and Dar es Salaam.

The cement industry’s capital-intensive nature and significant barriers to entry make it particularly susceptible to monopolistic behaviour when market participants pursue aggressive consolidation.

The proposed EAPC acquisition would create a dominant market position for Munif’s cement operations in Kenya, potentially reducing competition and limiting pricing flexibility for consumers.

Economic analysis suggests that such consolidation, when driven by financial distress rather than operational synergies, typically results in asset sweating rather than productive investment.

Strategic Implications for Decision Makers

The EAPC controversy illuminates several critical policy considerations for Kenyan authorities and regional economic planners.

First, the regulatory framework for foreign direct investment requires strengthening to distinguish between genuine industrial investment and distressed asset acquisition.

Current oversight mechanisms appear insufficient to assess the financial health and strategic intent of acquiring entities.

Second, the case demonstrates the vulnerability of turnaround situations to opportunistic acquisition attempts.

EAPC’s recovery trajectory makes it an attractive target precisely because its improved fundamentals can support debt service for over-leveraged acquirers. This creates perverse incentives that discourage operational excellence and long-term value creation.

Third, the parliamentary intervention, while politically expedient, highlights the absence of clear regulatory mechanisms for addressing such situations. Ad hoc political solutions create uncertainty for legitimate investors and may deter beneficial foreign direct investment.

Recommended Action Framework

The EAPC situation requires a coordinated response addressing both immediate concerns and systemic vulnerabilities.

The proposed share buyback programme represents a constructive alternative that preserves local ownership while maintaining access to international capital markets.

However, successful implementation requires careful structuring to avoid creating liquidity constraints or governance complications.

Regulatory authorities should expedite the development of enhanced due diligence requirements for acquisitions involving strategic industrial assets, including mandatory disclosure of debt structures, asset disposition plans, and operational investment commitments.

The introduction of “fit and proper” assessments for significant shareholdings would provide additional protection against asset-stripping activities.

Market participants require greater transparency regarding the financial health and strategic intentions of major shareholders, particularly in situations involving cross-border transactions.

Enhanced disclosure requirements would enable more informed investment decisions and reduce information asymmetries that facilitate opportunistic behaviour.

The EAPC acquisition controversy represents a critical juncture for Kenya’s foreign investment policy and industrial strategy.

While foreign capital remains essential for economic development, the country must develop more sophisticated mechanisms for distinguishing between constructive investment and predatory acquisition behaviour.

The resolution of this matter will establish important precedents for future cross-border transactions and signal Kenya’s commitment to protecting strategic industrial assets from opportunistic financial engineering.

Success in managing this situation could enhance investor confidence and regulatory credibility, while failure may encourage similar problematic transactions.

Decision makers must balance the legitimate needs of foreign investors with the protection of national economic interests, ensuring that industrial consolidation serves long-term productivity growth rather than short-term financial opportunism.

The EAPC case provides an important opportunity to strengthen this balance and establish clearer parameters for acceptable foreign investment behaviour.