If the story I'm seeing on [url=http://www.nation.co.ke/blogs/-/446696/1411254/-/view/asBlogPost/-/19ijk5/-/index.html]Nation [/url]is anything to go by, I really wonder who upholds the interests of public shareholders.

The gist of the story goes as follows...




In other words, Lafarge through their investments run a disguised monopoly in Kenya.

Guys, how did we get into such a situation where a clearly defined competitor is allowed to invest and gain such a controlling stake and better yet allowed to have two seats on the board of a competitor?

Corporate governance 101 does not allow you to do that.

The conflict of interests within Portland's board would not allow for any meaningful business growth, no wonder the company is such a problematic situation.

What are you talking about?? and who said Bamburi has issues with governance? Please re-read my post and understand the argument.

All these issues are about structures and control mechanisms applied to companies, and are as such squarely issues of corporate governance.

@chaka - ARM was about to collapse so Bamburi gave them a loan [& supplied clinker on credit] which was then converted into shares. ARM shares had fallen to 3/- at the time.

Clinker is a key raw material for cement manufacturing.

If not for Bamburi's support, ARM would have probably gone bankrupt.

BTW, did you know Microsoft gave Apple $150mn as a loan/equity many years ago? It also agreed to support Apple by creating/developing Mac OS versions of Microsoft Office. Without MS Office, many users would not have moved to using Apple's computers.

While creating or running a monopoly is not illegal, this particular case is quite smelly in the sense that these are two independent companies and Lafarge has over time aqcuired a controlling share in the company. That is the heinous part.

This kind of business practice may seem normal in Kenya but I can tell you there is something very abnormal about the structure of this company.

If you can recall how this situation exploded, NSSF wanted to offload some little amount shares from Portland, but that meant that the "government's collective number of shares" both NSSF and direct government through treasury would reduce and loose the threshold required to make it a parastatal.

Somehow, someone had conviced another somebody in NSSF to offload the shares. Now that I'm thinking about it, the shares NSSF was trying to offload were little percentage wise, just enough to allow the holding to drop slightly below the required threshold.

Anyhow, the fellows in Portland then tried to use that window and ran to make the company private. That is when the "government" through CMA realized that they had shot themselves on the foot.

Someone in that Portland board knows or knew what they were trying to achieve by hurredly trying to privatize the the company.

Portland needs a strongly willed CEO who will wipe out this mess and indeed buy back some shares from Lafarge and oust them from the board.

A board that is infiltrated by competitors can not clearly allow the execution of a plan that will make them better than the competitors. The same board also cannot be trusted stewards of shareholder's interest due to a conflict of interest on the expected performance of the company.

From a governance perspective such an argument does not hold. There is a clear conflict of interest.

Just as an example, Eric Schimdt(former Google's CEO) was sitting on Apple's board until Google decided to go into Android -he had to leave the board once the two companies became competitors.

This to my understanding was never a joint venture or alliance, I thought an alliance is made up of two independent companies coming together to form a new strategic unit. That is not the case here.

Even if we consider it to be an alliance for argument purposes, then Lafarge must have negotiated very well such that other venture owners have been given a raw part of the deal.

A strategic alliance would not be done by entering together with a competitor on the same line of business are you are operating and in the same location. Such an alliance brings no added value if one was to enter into such a deal.

It sounds as though you are misunderstanding the whole concept of alliances.

A clear case of an alliance is Shell/BP in Kenya. Two companies coming together to form a new unit in a new geographic location for sake of risks and costs.

Another example is Siemens and Nokia, which both made a joint venture Nokia Siemens Networks. Each company contributed their Network portfolios.

Where are the two companies that have come together in what you are calling an alliance?

I can only see Bamburi investing into another company. This should even be described that Portland is Bamburi's subsidiary. In fact it is if we consider ownership structure.

Competing on the same products but at different customer segments makes it even worse. This ensures that Portland never enters Bamburi's businesses which is actually possible since its an issue of quality and processes.

I know alliances can take various forms, but I still hold the opinion that this Portland - Lafarge issue is not at all an alliance not even near. You can quote me on that one.

On the other hand you can explain what kind of alliance it is if you happen to know more, I dont mind learning something new.

Nope, Not at all !

Lafarge owns Bamburi but does NOT own Portland.

"Bamburi Cement Limited is a subsidiary of Lafarge, the world leader in building materials...."


Why would the newspaper report such a flimsy statement from the MD without taking him to task. The MD says...“Lafarge is not Bamburi. As Bamburi Cement, we only own 12.5 per cent of Portland and have no influence at the firm’s AGM. We also do not appoint directors at the firm,” said Mr Hussein Mansi.

If you try to go to Bamburi's website [url=http://www.lafarge.co.ke/]www.bamburicement.com[/url] you are redirected to Lafarge.co.ke and there is a clear statement in english to the effect..."Bamburi Cement Limited is a subsidiary of Lafarge, the world leader in building materials...."

I wouldn't be surprised if this will turn out to be one of the biggest board room scandals this decade.

I will not be easily duped on this one, something is utterly wrong here...

Yawa....I thot i said the % matter...A company becomes a subsidiary of another once it gains a majority of over 50% as such Bamburi becomes a subsidiary of lafarge. As for portland, its stake ni 41% but that guarantees them a seats on the board. I think i agree with Bamburi MD...let them talk to lafarge.