ZIMRE Holdings is ceding over 60% of its stake in South African-based Southern Union Reinsurance Company Proprietary Ltd (Sure) as part of a rescue package for the ailing company.
Sure, a broad-based reinsurance company, was placed under the management of a curator in August 2004 after it was found to be undercapitalised according to laws governing SA’s insurance sector.
The critical position of the company resulted in the curator applying to the South African High Court to liquidate the company after it failed to come up with a rescue package.
As part of the deal, Zimre will lose control of the company to an unnamed listed South African company, which will take up the largest chunk of the shareholding when Sure’s operations resume.
The South African financier is said to have set a conditional capital injection agreement for an undisputed stake in the company.
The two parties are said to have agreed on a position where the company will inject over R100 million into the ailing concern in exchange for a minimum 60% stake.
Under the new arrangement, Zimre is said to have settled for a minority stake in an effort to resuscitate the operations of the regional unit.
The deal is said to have been structured in such a way that after the capital injection, when operations resume the company will also be rebranded in accordance with the changes in Sure’s share structure reflecting its controlling shareholders.
Benjamin Khumalo, Zimre Holdings chairman, confirmed at the company’s annual general meeting on Tuesday that the company had agreed on a rescue plan for Sure.
“I would like to notify that the company has reached an agreement with a listed South African company for the resuscitation of Sure under a new brand name,” Khumalo said.
He however remained tight-lipped on the rescue deal until he was forced by a shareholder to divulge that Zimre would retain a minority stake in the rescue deal.
“We are going to hold a minority stake in the company. The South African company will have the largest share, considering they will be injecting millions into the company,” Khumalo said.
He said the conclusion of the deal was still awaiting regulatory approval, which is necessary considering the nature of the business and the legal implications.
“We are still awaiting regulatory and other necessary approval for final conclusion,” said Khumalo.
The annual general meeting was the first by Zimre after its controversial $60 billion rights issue which saw the majority shareholder, Mutumwa Mawere’s collective 46% stake held through Endurite and UKI, being significantly diluted.
Khumalo said the company was satisfied with the rights issue and would now work towards channelling the funds raised towards the recapitalisation of its operations.
He said the company was also planning to inject capital towards its regional expansion drive, which is projected to take the largest chunk.
“The rights issue was successfully concluded with $60 billion having been raised and these funds will be used for recapitalising the company’s operations while the other funds will be used for our regional expansion exercise,” Khumalo said.