Sameer exploring share sale, tyre export options

Sameer Africa Ltd., is planning to enter the Rwandan tyre market in the next two years, company executives told Bloomberg recently. At the same time, the company is said to be exploring the possibility of setting up a subsidiary in Nigeria. However, in light of ongoing share sale talks since last summer, this could be interpreted as positioning the company for an outside bid.

Sameer, which was born out of the former Firestone East Africa operation in 2005, reportedly wants to add further export options to the 11 African countries the firm currently sends tyres to. Bloomberg cited, CEO Allan Walmsley as saying: “We are taking a very big interest in Rwanda despite the market being small…What we are seeing is good governance, and we are seeing the GDP growth of the country being sustainable.” Executives also recently visited Nigeria’s “massive market”.

Sameer reported a net loss in 2014 of 66.9 million shillings (US$726,000) compared with year-earlier profit of 401.2 million shillings. Revenue fell 13 per cent to 936.5 million shillings – apparently due to “ever-increasing competition from subsidized tyres imported from the East”.

According to Walmsley this kind of “unfair competition” has caused Sameer’s Kenyan tyre market share fall to 16 per cent from heights of 54 per cent. Perhaps unsurprisingly, Sameer is part of a group of Kenyan firms requesting that the local government deploy countervailing duties against Chinese imports similar to those in place in the US and under-discussion in Russia.

New Chinese owners?

However, Sameer’s relationship with the Chinese is complex. In 2008 it emerged that the company was importing and selling Triangle-produced tyres in order to keep sales volumes up when production capacity stalled.

Indeed, when Sameer announced that Bridgestone had finally exited its shareholding in Sameer in December 2013 (something that was a legacy of the firm’s Firestone East Africa days), the company announced that it was looking for an Asian technical/investment partner.

Nowadays the meaning of this statement is even clearer with the reportedly having spent the last nine months in talks with an Asian investor. According to a number of different sources, these talks centre on the sale of 40 per cent of Sameer’s manufacturing unit in order raise fund for increased capacity. One report from July 2014 suggests the Nairobi-based tyre firm requires at least 2 billion shillings ($22.8 million) to upgrade its factory.

Last summer talks were described as “ongoing”, with Walmsley leaving the door open for a larger shareholding: “We are not looking for a technical partner alone but one who also will contribute equity” potentially a “50:50 partnership”, Kenya’s Capital FM quoted him as saying.

Given the two firm’s former working relationship, Triangle would seem to be a likely candidate for such talks, but as the recent Pirelli ChemChina example suggests, it pays to expect the unexpected.