Pakistan’s major cement maker seeks ‘landmark’ acquisition of competitor

Maple Leaf Cement Factory Ltd (MLCF), a major cement producer of Pakistan, is considering the acquisition of a competitor in a move that could make it the second-largest cement producer in the country’s northern region.

In a notice to the Pakistan Stock Exchange (PSX) on Thursday, the company said it has initiated talks regarding a potential acquisition of Pioneer Cement Ltd (PIOC).

MLCF, along with its associated company Maple Leaf Capital Ltd., already holds an 18.6% stake in the company. The Habibullah Group currently controls about 58% of PIOC through multiple entities, with the remainder held by public shareholders.

If completed, the deal would expand Maple Leaf’s production capacity from 8 million tons to 13.02 million tons, boosting its regional market share in northern Pakistan from 12% to 19%, according to a research note by Topline Securities.

“Maple Leaf’s possible acquisition of Pioneer would be a transformative deal, strengthening its foothold in the high-demand northern region,” said Rabia Yousuf, analyst at Topline Securities. “The combined entity’s scale and synergies could unlock meaningful operational efficiencies over time.”

Valuation and comparisons

Based on the November 12 closing prices, Topline Securities estimated MLCF’s enterprise value per ton (EV/ton) at $33.6, while PIOC trades at $37.8 per ton — both below the industry average of $46 per ton.

The brokerage house noted that recent market activity supports higher valuations in the sector.

Attock Cement, for example, is reportedly being acquired by Fauji Cement and Kot Addu Power Company at a price range of PKR 300-350 per share, translating to an EV/ton of $43-48. Excluding its older production lines, ACPL’s valuation rises to about $75 per ton on newer capacity.

Topline Securities believes PIOC should command a valuation premium to Attock Cement due to its strategic northern location — Pakistan’s largest consumption area — and its 30-megawatt coal-fired power plant. The company operates three production lines, with the newest, Line III, commissioned in 2020 and capable of producing 3 million tons annually.

Assuming a valuation range of $50-60 per ton, PIOC’s total enterprise value is estimated at $260-312 million (PKR 73-88 billion), translating into an equity value of PKR 309-373 per share after adjusting for net debt.

If only the new production line is valued at $80-85 per ton, the estimated equity value stands between PKR 285-303 per share.