HomeBusiness DigestDemergers, listings galore in 2003

Demergers, listings galore in 2003

Shakeman Mugari

INDIGENISATION was the dominant theme on the Zimbabwe Stock Exchange (ZSE) in 2002 with the corporate landscape changing significantly on the back of major takeovers in listed companies.

The year 2003, however, belonged to demergers, listings and acquisitions on the stock market. Share buybacks also made their mark on the stock market.

A second purely communication company graced the market in the form of Celsys four months into the year. Celsys, whose business is in communication and cheque printing, listed at $16,05 and closed the year at around $80 a share, representing a phenomenal growth of more than 400%. Investors seem impressed judging by the volumes changing hands on the counter.

Midway through the year, Fidelity – another Zimre by-product – also came onto the bourse through an Initial Public Offer (IPO).

The insurance firm listed at $2,98 but the stock has only moved by $2 since coming onto the market to notch $5 at year-end.

The company is now trying its luck in the United Kingdom as part of the regional expansion programme begun as a follow-up to the listing.

Brick-moulding company Willdale also registered on the market. The company is a by-product of the split of Mashonaland Holdings Ltd (Masholds), which also gave birth to Powerspeed.

The company announced at the time of the listing that it was banking on the massive construction backlog in Zimbabwe.

Investors are however yet to realise the benefit of investing their funds in the small company as the share has now increased about 116% since listing.

Zimsun also split its properties portfolio to make Dawn Properties which also listed on the stock exchange as a stand-alone counter.

First Mutual also came to the market after the demutualisation process. The company had to huddle over some shareholder activism before coming onto the market.

The policyholders in the mother company First Mutual Society wanted to be represented on the board of directors.

The market is anxiously awaiting the next set of results. The insurance firm also sealed the year with a deal with Trust Holdings Ltd.

TZI finally demerged Strategis to become a purely agricultural group.

This also follows the company’s successful move to spurn off Art Corp two years back.

Now Strategis is likely to be among the first new-comers on the market following an application to list on the market this year.

Trust diversified through the acquisition of a 15% stake in First Mutual to become the anchor shareholder in the insurance group.

In the deal First Mutual also increased its stake in Trust to 25%, up from 9%.

The two companies also merged their respective asset management companies. First Mutual becomes a 40% shareholder in Trust Corporate Securities, the group’s stock broking arm.

The year also saw Innscor increasing its stake in Natfoods to 26%, up from 16%.

A consortium led by Ray Kaukonde, Takepart Investments, also acquired 21% of Natfoods.

Businessman and politician Philip Chiyangwa took up 16% of Circle Cement’s issued share capital. An undisclosed indigenous consortium also snapped up the OK Zimbabwe retail division for $7 billion as the group narrows its operations to supermarket business.

Carrier company Clan Holdings brewed probably the largest acquisition in the transport sector by taking over Pioneer Transport in a deal that is yet to create one of the largest carrier companies.

Clan also capped the memorable year with a well-received rights issue. The proceeds from the rights issue were used to finance the deal which was worth $7,5 billion.

Industrial conglomerate Radar Holdings disposed of its engineering subsidiary, Commercial Industrial Holdings to a consortium of indigenous businessmen for a purchase consideration of $5,3 billion. The company is now concentrating on the construction and lumber business. Radar’s subsidiary Border, which listed separately, had part of its forest razed by fire.

The fire destroyed over 900 hectares of plantation.

Horticulture group Ariston disposed of its stake in the Tetrad Group. During the same period the horticulture counter acquired the assets and operations of Favco.

Other proposed deals however did not see the light of day.

The TA/Intermarket deal failed to sail through after the responsible authorities refused to give their assent.

The deal would have resulted in Intermarket getting 100% of Zimnat in exchange of 23% in Intermarket. The aborted deal seems to have punished Zimnat whose shares are trading at a mere $4.

Intermarket managed to end the year on a high note with the acquisition of Mash Holdings.

The deal meant that Mash Holdings is now effectively a property division of the financial group.

On the indigenisation front, Mutumwa Mawere’s desperate effort to acquire the former TPH companies also hit a snag. The Supreme Court last year ruled that Mawere’s company Ukubambana Kubatana Investment (UKI) could not sue the Privatisation Agency of Zimbabwe as it was not a legal entity but a mere extension of the President’s Office.

The Supreme Court judgement overturned an earlier High Court ruling which stipulated that government should dispose of the three companies to UKI.

The three disputed companies -Cairns, Astra and Tractive Power – have seen their stock prices shoot through the roof since coming to the market three years ago. The battle is however far from over with UKI now planning to come back to court with another dimension to the case.

The market was also disappointed by some billion-dollar deals that collapsed at the eleventh hour.

The proposed merger of Colcom and the Cattle Company of Zimbabwe hit a brick wall after the Competition and Tariff Commission refused to sanction the transaction.

The commission concurred that the merger was likely to create a monopoly in the meat business.

Just before the end of the year Innscor and Tedco failed to agree on yet another promising deal. According to the deal Innscor would have disposed of TV Sales and Hire in exchange for a stake in Tedco. Tedco also announced its intentions to unbundle its furniture and retails division. The Simba Mangwende-led company also plans to list as Nyore Nyore on the local bourse.

According to reports the company ended the year on a bad note after its bid to acquire OK’s furniture division flopped. Rights issue offer was also a major theme on the stock market.

Century, Pioneer, Finhold, CFI and Mash Holding came to the market in search of funds.

The market is also awaiting the unbundling of CFI into separate entities that would be listed this year.

According to preliminary information in the market, the company split would result in the retail sections, Farm & City and Town & Country, trading under one listed arm.

Mash Holdings subsequently tra-nsformed into a fully-fledged property company after the rights issue which raised $26 billion to purchase formerly Anglo American and Intermarket Holdings buildings.

The market also witnessed an increase in share buyback schemes by companies listed on the stock exchange.

Ariston, Truworths, Edgars, Colcom and recently Econet received approval from shareholders to repossess some shares.

Edgars said it would repurchase up to 10% of its issued share capital. Ariston said it would buy back 10 million shares to increase the company’s shareholder value.

Colcom directors gave management the nod to repurchase 800 million shares in the company giving it a 15,27% stake. Colcom’s share buy-back makes management the second largest shareholder after Old Mutual Ltd with a 30,44% stake. Truworths also had a one-for-10 share split.

Continental Securities and NMB Holdings made news in the market after their activities were deemed illegal.

NMB Bank lost its foreign currency licence for flouting exchange control regulations. The bank, which caters for the top end market, was allegedly trading on the parallel market.

Its subsidiary Continental Securities Trading (Pvt) Ltd had its two brokers Bruce Eeson and Edwin Gumbo expelled from the stock exchange. The two were deregistered for “bringing the exchange into disrepute”. They were also accused of front running on the market.

The securities company is still without a broker.

On the broad perspective government’s effort to resuscitate the economy proved fruitless with inflation reaching 619,5% contrary to Finance and Economic Development minister Herbert Murerwa’s prediction that it would be reduced to around 96% by December.

Government continued to sing the blues with foreign currency remit-tances to the Reserve Bank of Zimbabwe plunging to an all-time low.

Faced with simmering pressure from the business sector government reluctantly eased on the price control policy. Agriculture, the mainstay of the economy, scaled down by 70% while manufacturing nose-dived 35% during the year under review. The GDP plunged by close to 12%. This year however investors, business people and the public are hoping the new RBZ governor Gideon Gono can come to the rescue. This year is likely to see a further recession in the economy. It would test Gono’s new policies which include the forex auction system.

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