All’s (un)well that ends (un)well

THAT the shareholder dispute at KML was undesirable goes without saying. It soiled the company’s brands.


The morale of the staff was affected with some key personnel resigning in protest. The business suffered with the specification of TM Supermarkets being a case in point. TM supermarkets has lost considerably market share to competitors and new players. This will be difficult to reclaim. The KML share has, as a result, performed miserably ever since the turf wars began. It is this background which makes Econet Wireless Capital (EWC)’s requisitioning for an extraordinary general meeting to consider the demerger of Kingdom Financial Holdings imperative.

The bigger picture will be lost if anyone dwells much on whether Nigel Chanakira or John Moxon wins or loses after the demerger. KMAL is a listed company with several shareholders who have never really benefited from the merger because the top two people started fighting soon after. Unfortunately, the pair’s actions divided the investors on perceived political and racial lines to such an extent that a person either had to belong to Nigel’s or John’s side at the expense of rational discourse. Some sections of the media see Econet’s requisition as sign of strained relations between Chanakira and Strive Masiyiwa. As far as many are concerned, the demerger proposal is a business decision prompted by a desire, shared by all KMAL investors including EWC, to extricate the company from the current situation of sterility.  
This column in 2007 carried an article entitled; “KMAL: Will it be happily ever after?” in which we queried the wisdom of the merger.  And naturally the promoters of the deal were not amused. The deal was being sold as the best thing to have happened to the concerned companies with the usual mantras about synergies, shareholder value creation and critical mass. It has never been clear to many, from the onset, how combining a tea producer, hotelier, retailer, banker with a yarn and bed line manufacturer would benefit the shareholders.
The merger was also atypical on the Zimbabwe Stock Exchange because many companies in recent times were unbundling to unlock shareholder value. Many of these demergers are success stories. For instance OK and African Sun are successful business after being weaned off by Delta. General Beltings, Steelnet and Turnall, which resulted from the demerger of THZ are thriving businesses. Equally Cairns, Astra and TPH still hold their own after coming out of Astra Holdings. Other recent unbundlings include Dawn, Pearl, ZPI, Redstar which came from African Sun, AFRE, ZHL and Starafrica respectively. Given this demerger revolution on the exchange the merger deal was a surprise to the market.
Whereas most mergers are reversed mainly because the businesses would have failed to co-exist, for KML the divorce is a result of poor working relations between the two main actors. This exposes the limitations of the entire deal-making process which focuses on assets, profits and business synergies but ignores the people. The financial advisors provide detailed financial, commercial and operational data but make little, if any, effort to analyse the cultures of the firms, the roles various people play in their respective companies together with their capabilities and attitudes of the people. With hindsight, human due diligence might have saved everyone the anguish caused by the KMAL debacle.
The differences in business culture and management styles, may possibly, be some of the reasons for the fallout between Chanakira and Moxon. Meikles Africa has traditionally been run as a family business whose management has always been passed from one generation to the other of the Meikles people. It has never been aggressive but conservative. Although it has been listed since 1962, the company has not diverted much from the business model established by its founders. Kingdom on the other hand was/is a very aggressive business which grew rapidly from being a discount house in 1995 to mid-tier listed financial services company by 2007. The group was considered a good example of indigenous entrepreneurship and this may have been what attracted Meikles Africa to invest in it.
In their respective business, both Chanakira and Moxon were doing well. However it was always going to be difficult to reconcile their differing style of management. It is unfortunate that when they discovered that their differences were irreconcilable they both chose to fight bitter wars which damaged their reputations and that of the company.
With hindsight, the EGM called by the Moxon group to remove some directors including the chief executive should have been allowed to take place. As the recent events at RTG have shown, shareholders can effectively deal with any matters affecting their companies. The board and shareholders of RTG allowed an EGM called upon by the major shareholder, Banhams Investments, to fire eight directors to take place. Shareholders instead voted to remove only one director and retained the other six after the chairperson stepped down on her own. What was potentially an explosive matter was in the end resolved internally.
Maybe, if they had been given an opportunity earlier on, KML shareholders could have resolved the impasse long back. This did not happen and the EGM on June 22 should be the time to make amends.

BY RANGA MAKWATA  

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