THE controversy surrounding the proposed takeover of Radar Holdings Ltd by minority shareholder, Franconian Zimbabwe Investments (FZI), looks set to continue with revelations this week that t
he Reserve Bank of Zimbabwe in concerned about the deal.
The deal is also likely to run into problems with the Competition and Tariff Commission, which still has to approve the transaction, sources say.
The FZI, which currently owns 4,3% in Radar, is proposing to buy out minorities in the company for $35,5 billion. FZI is offering to buy all Radar’s share capital at $640 per share.
Sources close to the deal say the central bank is concerned at the understated value of Radar’s assets and what appears to be an attempt to externalise the company’s trillion dollar assets.
While the circular to Radar shareholders shows that the FZI is a Zimbabwean company, it omits to mention that a foreign investment company called Tanks Consolidated Investments wholly owns it.
A search at the Deeds Office shows that FZI was registered on September 11, 1950 (No 335/50) and is owned by Tanks Consolidated Investments (registered on August 6 1985 a shelf company registered in the Bahamas.
This means that FZI is essentially a foreign-owned company even though it has local directors.
There are also concerns of conflict of interest in the market from the manner in which the deal was handled. FZI and Radar share Ernst & Young Charted Accountants as their auditors.
Shareholders have also accused Radar directors of trying to externalise the assets of the company and sell them for a song.
“The only reason why they could sell so cheap is that they are probably selling this company to themselves,” said one shareholder opposed to the deal.
Documents in the possession of businessdigest reveal that there have also been protestations in the background by shareholders who are not satisfied with the offer price. One of the shareholders wrote a letter to Radar last month to question the rationale of the deal. He protested in his letter that the net asset value of the company had been grossly understated.
Radar is being sold for $35 billion, an amount barely enough to buy two houses in Harare’s plush suburbs like Greystone Park and Borrowdale.
However, Radar’s asset value is estimated at above $5 trillion.
The company owns 17 United Builders warehouse outlets, estates and stock valued at $1,7 trillion, Bulawayo Toyota worth about $250 billion and Macdonald Bricks in Bulawayo valued at $250 billion.
Radar also owns 51% of Border Timbers, which has 47 000 hectares of Zimbabwe’s prime forest and five state-of-the-art sawmills. Border also has buildings and vehicles and an Export Processing Zone factory.
In his letter, the shareholder protested that Radar’s accounts had not been prepared in accordance with internationally accepted accounting standards.
He also said three of Radar’s directors also sit on the FZI’s board and therefore should not participate in the vote for the scheme.
The shareholder requested to have consultative meetings with the Radar board to get a full explanation of the implications of the deal for minority shareholders. He also wanted to put up a counter offer of $1 000 per share to the minority shareholders. FZI wants to pay $640 per share.
The problems at Radar are likely to mount, with information that if the deal goes through it would breach Zimbabwe Stock Exchange regulations on foreign ownership of companies on the ZSE.
The acquisition of Radar by FZI has a direct impact on Border Timbers, a listed company in which it owns 51%.
Tanks Consolidated Investments, which owns FZI, will automatically own 51% of Border Timbers — a structure that violates ZSE regulations. ZSE guidelines stipulate that individual foreign investors can own a maximum of 10% of a listed firm while collectively they are allowed 40% of each company.