Responding to questions from businessdigest on Tuesday on the group’s re-listing, KFHL said it intended to strengthen its capital structure after the de-merger, which analysts say affected its cash flows, expansion and perception on the market.
“KFHL is currently focused on finalising the demerger process, which is hoped to be concluded soon,” said KFHL. “In tandem with this process, Kingdom is exploring the various strategic options available to the group to enable it to grow its business and also continue to enhance shareholder value. The immediate objective, however, is to strengthen the capital structure. This process is proceeding according to plan.”
Last month, KFHL applied to the High Court to reduce its issued share capital before formally applying to be re-listed on the stock market.
Share capital reduction is a process of decreasing a company’s shareholder equity through share cancellations and share repurchases.
The reduction of capital is done by companies for numerous reasons, including increasing shareholder value and producing a more efficient capital structure.
After a capital reduction, the number of shares in the company will decrease by the reduction amount. In some capital reductions, shareholders will receive a cash payment for shares cancelled, but in other situations, there is minimal impact on shareholders.
ZSE CEO Emmanuel Munyukwi said it was normal for a company coming from such a background to apply for the reduction. He said KFHL should have the consent of the High Court before formally applying to be re-listed on the stock market.
Kingdom and Meikles Africa merged in December 2007 to form Kingdom Meikles Africa Ltd (KMAL).
Kingdom Financial Holdings Ltd founder Nigel Chanakira, who was the KMAL’s CEO, was then appointed CEO of Kingdom Meikles.
In June 2009, the companies said they planned to separate following a disagreement between Chanakira and KMAL chairman John Moxon, whose family is the largest shareholder in Meikles.
What followed was massive squabbling over shareholder value as Chanakira frantically tried to buy back his stake in KFHL.
An Extraordinary General Meeting (EGM) held last month resolved that Chanakira should regain control of the bank after agreeing to swap his 6% stake in Meikles. Meikles Africa owns TM Supermarkets, Zimbabwe’s biggest retail chain, and Tanganda Tea Estates, the nation’s biggest producer of the leaf. The demerger was also approved by the Finance ministry and the central bank.