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Biti wades into Kingdom war

FINANCE minister Tendai Biti has officially intervened in the “vicious corporate war” between Meikles Africa Ltd and Kingdom Financial Holdings Ltd (KFHL), which has drawn into its vortex President Robert Mugabe and other high-profile politicians.

The involvement of Mugabe, Biti and Reserve Bank governor Gideon Gono in the intensifying battle for KFHL has left the corporate giant smouldering.

Mugabe has openly declared his support for the embattled KFHL founder Nigel Chanakira and wants to resort to his controversial Indigenisation laws to settle the dispute in the struggling banker’s favour despite that the companies in the dispute are already owned by Zimbabweans.

Biti says he wants a “win-win solution” in what he recently described in a letter to Gono, which the Zimbabwe Independent has in its possession, as a “vicious and unkind corporate war”.

Gono recently said Biti and himself have had “enough of this nonsense” and gave the two merged corporate entities an ultimatum to resolve the issue to avoid further destabilising the fragile banking sector.

The fight between the companies has been affecting the banking sector, the image of the country to investors, and the local securities market. New proposals have now been put on the table to try to resolve the issue. The two entities and their lawyers are currently discussing the latest proposals.

In a bid to resolve the issue, Biti on August 26 wrote to Gono suggesting ways of disentangling the convoluted corporate merger. KFHL merged with Meikles Africa Ltd in 2008 to form Kingdom Meikles Africa Ltd (KMAL) amid a blaze of publicity to create a financial concern which had ambitions of an offshore listing. The new conglomerate included TM stores, Meikles Hotel, Meikles stores, Tanganda, Cotton Printers and Kingdon Bank and its subsidiaries.

In October last year, Chanakira entered into an agreement with Meikles shareholders, including John Moxon, to acquire 43% of KFHL after the
de-merger. However, Chanakira failed to raise the required US$15 million. Deadlines given for payment expired. Extensions were sought and granted. Time limits provided in the extensions also expired, but Chanakira still failed to raise the money, setting off fresh clashes in the protracted struggle over the KMAL de-merged matrix.

Biti says in his letter to Gono that a “win-win solution” could be found which would “achieve the objective of stabilising the market and quashing the noise, enabling Chanakira to hold on to his bank and unlocking shareholder value in both institutions”.

“It is self-evident from the correspondence and report you have provided that the relationship between the parties has irretrievably broken down with no prospects of reconciliation,” Biti wrote to Gono in his August 26 letter titled Meikles Holdings versus Kingdom Bank.

“To put it mildly, the parties are locked in a vicious and unkind corporate war. Under these circumstances it is my opinion that the demerger of the two entities is the proper and logical solution,” Biti said. “The net result of this is that Kingdon Bank will be listed separately. I hope and trust that for the sake of stabilisation of our country, this advice is upheld.”

In his letter, Biti makes suggestions of the way forward on the issue which has created a storm in political circles.
“The second issue relates to the settlement of the cross-shareholding by shareholders in both institutions. The papers before me disclose the fact that Chanakira has offered to buy out Meikles Holdings’ interest in his bank for the sum of US$15 million,” Biti says.

“It also appears that BancABC are prepared to pay this amount. From the discussion with yourself it appears that only an amount of US$7, 5 million is available. Assuming BancABC has the full amount, then I advise that the money be deposited in the creditor’s bank account at Stanbic. I see no merit in payment of this amount to the central bank”.

A row had erupted over where the money from Chanakira to Moxon should be kept, with Reserve Bank officials saying the funds must be kept at the central bank, and Meikles executives demanding it must go to their account at Stanbic. Biti says the money must be paid to the creditor’s Stanbic account.
Biti also says in his letter that he agreed with Gono that if Chanakira does  not have the US$15 million, then the shareholdings and shares in dispute must be evaluated before a deal is done. However, Biti then says valuation process would cause problems because “any evaluation, either professional or otherwise, will always be subjective and in many situations fail to agree on the persona of the evaluator”.

Biti goes on to suggest that the evaluation should be left to the market if the de-merger occurs and KFHL is re-listed on the Zimbabwe Stock Exchange. “In short, let the market determine the values of the shares in both entities,” he says.

On the last contentious issue of US$22, 5 million which is theoretically held by the Reserve Bank, Biti says it was a “technical issue touching on capital reduction and other corporate issues”.

The US$22,5 million sum was lodged with central bank by Meikles in 2004. The funds were used to recapitalise Kingdom Bank’s three subsidiaries to meet the prescribed minimum capital requirements.

“My view of the matter is that this is not an issue that should stand in the way of a settlement. Moreover as minister responsible for the administration of the Companies Act, I would expect that the same is complied with, in particular Section 92. I hope the above suggestions may help you guide the parties to a win-win situation,” Biti tells Gono in the letter.

 

Dumisani Muleya

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