The board of cement giant PPC killed the proposed merger with rival AfriSam in favour of a possible deal with a foreign company, insiders said on Friday. But news that AfriSam's proposed tie-up had been scrapped was greeted with relief from PPC shareholders, who sent the stock 5.7% higher to R18.99, adding R623-million to the company's value.PPC's team notified AfriSam on Wednesday that it would not continue with the deal, leaving AfriSam none the wiser as to why it walked away.The collapse of the proposed deal left people close to AfriSam with a sour taste in their mouths."So they killed it. The PPC board killed it without even having the courtesy of explaining why or showing it to its shareholders," said one person.Others said that PPC was rumoured to be in talks with two foreign companies, including Camargo Corrêa, Brazil's second-largest engineering and construction company, which had links with local cement maker NPC.Contacted on Friday, PPC chairman Bheki Sibiya refused to reveal why the merger had failed.But Sibiya was adamant that PPC was not currently in talks with foreign companies.The possibility of a merger was first raised in December, after a bruising boardroom bust-up led to the resignation of former CEO Ketso Gordhan in September.After Gordhan's departure, the share price tumbled nearly 50% from R32.50 to a low of R16.46 earlier this month amid concern that the AfriSam merger did not make business sense.After Friday's announcement, PPC's stock rallied, suggesting investors were relieved.Stephan Olivier, the CEO of AfriSam, would not elaborate other than to say that the parties had agreed to terminate the planned deal after failing to reach consensus on the terms.But the transaction had not yet reached the valuation stage, according to sources.Some people close to the deal said PPC's management had just gone for "self-preservation". A merger would probably have resulted in some executives losing their jobs when the two boards folded into one.One of the hurdles to a possible merger would have been getting approval from the Competition Commission, as the merged entity would have controlled 60% of the South African market and been the largest cement producer in Africa.AfriSam and PPC had jointly engaged competition lawyers and consultants to nail down a watertight case to present to the competition authorities.The AfriSam and PPC team then appointed McKinsey & Company to highlight any further hurdles that the commission might use to find fault with its proposal.The groundwork by the teams convinced them they had a "winnable case" at the commission, a source at AfriSam said."The work that needed to be done next was to work from the bottom up, [doing a] due diligence of the companies to work out the exchange ratio."In its official merger proposal presented to PPC on December 5, AfriSam suggested a ratio in which shares could be exchanged between the companies. The next step would have been to evaluate their respective financial position.Everything appeared to be on track. On Monday last week, PPC's lawyers updated its executives on the expected hurdles and proposed remedies.But by Wednesday, it was a different story as PPC surprised AfriSam by informing them that the deal was off the table.Although Olivier would not go into details, insiders said AfriSam had been told by PPC that they wanted a higher number of shares in exchange for its stock - in other words, it valued the PPC stock higher than the merger proposal suggested.This surprised AfriSam, given that no due diligence had yet been done to establish a fair ratio. "They [PPC] told AfriSam that they don't think the synergies between the two companies will be big enough for their shareholders," a person close to the negotiations said.Apparently, PPC's executives said they believed the company had a lot going for it on a stand-alone basis, without AfriSam in the picture.Olivier said AfriSam would not launch a hostile bid for PPC as everything had been done in a friendly manner.While some analysts felt the deal didn't make business sense, others favoured it.Wayne McCurrie, the head of portfolio management at Momentum, said the merger would have been good for both parties as there was too much capacity in the cement industry already...