EGM set to seal KMAL divorce

KINGDOM Meikles Limited will next month hold an extraordinary general meeting (EGM) to kick out former KMAL chief executive Nigel Chanakira and directors, Callisto Jokonya and Sibusisiwe Bango, as directors.


In a notice to shareholders yesterday, Kingdom Meikles said the EGM on September 24 was a result of an earlier one on June 22 where shareholders mandated the board to implement the de-merger of KMAL.
“It is in terms of the de-merger transactions that Messers NMK Chanakira and CM Jokonya as well as Ms S P Bango (the three directors) resign as directors of the KML Board with effect from June 22 and Messer JRT Moxon and CB Thorn resign as directors of the Kingdom Financial Holdings Limited (KFHL) board with effect from June 22,” reads the notice, which is signed by the company’s board of directors.
The notice said the board could not fulfill the essential terms of the de-merger transaction as the three directors had not resigned as directors of KML and “are refusing to do so notwithstanding efforts made by the KML board at a meeting held on August 5 and adjourned to August 6 respectively at which all directors, including the three directors attended”.
“In the circumstances the board has no alternative but to then convene the EGM so that shareholders can consider if the three directors should be removed as directors of the company.
In considering the resolutions, shareholders are being asked to note that at the board meeting, the board unanimously resolved to withdraw the South African litigation against Cool Bay investments and Mentor Holdings and its directors to enable an amicable settlement of the claims to be negotiated and agreed with the respondents.
“The board is fully aware that it has a fiduciary responsibility to shareholders and the regulators to ensure that any settlement agreed with the respondents in respect of the South African litigation is transparent and in the best interests of the company,” said the statement.
In recognition of this fiduciary responsibility the board at the board meeting resolved that if an amicable settlement in the best interest of the company is not agreed then the South African litigation was to be reinstituted.
“The board as a whole has this fiduciary responsibility and in no way will the resignation of the three directors, alter the board’s fiduciary responsibility to the company and its shareholders to ensure the South African litigation is settled in the best interest of the company,” the statement said
Kingdom Meikles Limited said the proposed removal of these directors has been motivated by no other consideration other than the need to comply with the resolutions passed by the shareholders.
“Because of the obstructive and confrontational approach taken by these directors, the board also intends to seek their removal from the boards of all subsidiaries of the company. The board is no longer confident that they will act in the best interests of its subsidiaries on whose boards they sit,” said the statement.
The motion to de-merge KMAL was issued by Strive Masiyiwa’s Econet Wireless Holdings Ltd (Econet), the largest institutional investors with a 10% stake in Kingdom Meikles Africa Ltd (KMAL).
An approval of the de-merger was inevitable after former KMAL chairman John Moxon, whose family is the majority shareholder in Meikles Africa, was allowed to vote during meeting, his lawyer Sternford Moyo of Scanlen & Holdeness having successfully challenged his specification.
All four resolutions — the disposal of KFHL shares, the distribution of KFHL shares, listing of KFHL on the Zimbabwe Stock Exchange and change of name received a 98% vote in favour. The minority did not object.
The investigator into the alleged externalisation by Moxon, BCA Consultancy, had written two letters to EGM chairman Much Masunda before the EGM saying the Meikles family was not supposed to vote as the company had established externalisation deals “indirectly or directly”.
Moyo, however, argued that the specification was a legal nullity because the minister who issued the specification order — Samuel Undenge — did not have legal authority to act as a minister at the time. He said the Moxon family was “purported” to have been specified when the Cabinet had been dissolved.
“Therefore, the specification on January 16 2009 is null and void,” said Moyo.
Was the merger a positive move?
There are too many examples of how mega-mergers have been disastrous around the world, and the authors of this merger seem not to have learnt the art of integration, which is key to the success of any merger.
The unprecedented share rallies of concerned companies preceding the merger were enough signs showing a shadowy battle for control, and the collapse of the merged entity is just confirmation of the battle for control.
The positive thing after the de-merger is that there were no huge material disruptions on the balance sheets of the concerned companies, largely because the merged entities were from different industries, otherwise it was going to be a messy affair. The merger was already distorting shareholder value as the valuation of this mammoth entity was complicated, and if it had survived, it still was going to be unbundled to unlock value.
Analysts said the merger was an unwise decision that was driven by tactical ignorance, and the dictates of the capitalism brought it down. However, what is important in Zimbabwe, and which is lacking, is strong minority shareholder activism and powerful fund managers. It was a good development because Chanakira will now focus on what he knows best; banking while Moxon focuses on his passion which is what he will be controlling.
Empirical evidence has shown that mergers and the creation of conglomerates are not really the best option for creating value for shareholders.
For instance, it has been argued that a merger brings together very different individuals with different passions shaped by a long intimate history while building their businesses. When you put these entrepreneurs together, their passions tend to collide and override all considerations and a clash is inevitable.
Mergers do have other important advantages such as creating a bigger entity with bigger muscle to compete on a global scale. For shareholders, it is an important step forward because the value that was trapped due to the dispute between the major shareholders had caused KMAL to be one of the worst performers on the stock market.
After the de-merger is complete, KFHL will regain control of its Kingdom Stockbrokers (Pvt) Ltd, the Discount Company of Zimbabwe Ltd, and Kingdom Bank Ltd while Meikles will take charge of TM Supermarkets, hotels, Tanganda Tea Company and Cotton Printers (Pvt) Ltd.
KFHL will now re-list on the Zimbabwe Stock Exchange (ZSE) as KFHL, while Meikles Africa Ltd will become Meikles Ltd.
Chanakira will retain his position as chief executive officer of KFHL. It was not immediately clear if former KMAL chair John Moxon will retain his role as Meikles Ltd CEO as sources said he will be based in South Africa most of the time.
In terms of the resolutions, Kingdom Meikles shareholders will get one KFHL share for every one held through a dividend in specie. In order to repay the US$22,5 million held in KFHL for capitalisation, the KFHL shares will be redeemed back as preference shares to Meikles Ltd.
KML finance director Bryan Thorn said 234 million shares will be ring-fenced to represent RBZ capital, which will be reallocated from KFHL to KML.
KFHL’s equity stood at US$34 million including the US$22,5 million as at December 30 2008.

 

Paul Nyakazeya