End of an era as Paunrana family loses grip on ARM
3 months ago, 17 Aug 08:08
For more than four decades the wealthy Paunrana family has kept a tight grip on the operations of the Nairobi Securities Exchange-listed cement maker, ARM. #ticker:ARM
The Paunrana patriarch, the late Harjivandas J Paunrana, founded the company, formerly known as Athi River Mining Limited, in 1974.
What started as a producer of agricultural lime morphed over time into Kenya’s second-largest cement maker at the height of its success, only behind LafargeHolcim’s Bamburi Cement.
Fourty-four years later, the Paunrana family is now on the verge of losing control of the company’s operations following the exit of Pradeep Paunrana, the late Mr Paunrana’s son, from ARM Cement’s corner office.
Mr Paunrana is set to relinquish his position after a management shake-up of the company whose fortunes have in recent years dipped sharply.
The shake-up orchestrated by UK sovereign wealth fund CDC Group will, however, see Mr Paunaran retain a seat on the cement maker’s board.
“The company is entering a new phase, from family-owned, family-managed, to institutional investor representation, to separation of management and board roles,” Mr Paunrana said in interview.
In a letter, Mr Paunrana sought to assure shareholders and ARM staff that better days lay ahead for the company.
“As founder shareholder and entrepreneur, I will be an active board member and support the incoming CEO and the management team in strengthening stakeholder relationships with suppliers, customers and the government in all the three East African countries where we operate,” he said.
The Paunrana family’s impending loss of control of one of East Africa’s biggest manufacturers has been looming in the past few months. The company has in recent months announced changes in its executive suite, further isolating the Paunranas who still hold significant shares in the business.
CDC, which owns a 42 per cent stake in the troubled cement maker, announced that a new CEO will be appointed to replace Mr Paunrana. The key boardroom changes also saw businessman Linus Gitahi take over as chairman.
Mr Paunrana sought to play down his exit in the Business Daily interview, even as observers reflected on the remarkable fall from glory of one of Kenya’s most prominent business families.
“This is as per plan, as most founders employ professional CEOs to run the day-to-day operations,” he said Thursday from the UK where he has travelled for business.
The management and board changes are seen as CDC’s bid to have a tighter grip on ARM’s operations. Shares of ARM, producers of the Rhino cement brand, jumped 6.25 per cent as the departure of the Paunrana family marked the culmination of a series of worrying headlines for the once profitable firm.
The stock stood at Sh5.10 per share by close of Thursday, down from the previous day’s Sh4.80 per share.
The company’s share price has fallen steadily from a high of Sh90 in 2014. Cement manufacturers in the region have been going through turbulent times, with profits falling and some going into the loss territory, as a result of stiff competition from cheap imports, high power costs and low demand in the housing and construction sectors.
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