TRACTIVE Power Holdings (TPH) Ltd is set to delist from the Zimbabwe Stock Exchange and be consolidated into Zimplow following the acquisition of its majority stake by the latter.
Zimplow acquired 57,21% of TPH from the Reserve Bank of Zimbabwe’s Finance Trust of Zimbabwe.
Well-placed sources said TPH would have to delist to pave way for a consolidation.
Discussions around an assessment on which company to delist are expected to start next week.
Zimplow is currently trading on market cap of US$17,486 million with a year to date loss of 26% whilst TPH has gained 10% this year on a market cap of US$17 million.
Market expectation is that the acquired entity, TPH, be delisted, which partially explains the recent rally of the share price after the takeover was announced.
Analysts say apart from the disposal of Puzey & Payne, which was not aligned to Zimplow’s core business, the rest of the business units such as Farmec, which specialises in agricultural equipment and Barzem, specialising in mining and construction machinery, fit in with the manufacture of agricultural implements, bolts and screws.
Zimplow said the investment offered the group potential to increase revenue and reduce costs through exploitation of regional cross-selling opportunities, enhancing economies of scale, technology and product sharing.
Since the purchase of the stake Zimplow CEO Zondi Kumwenda moved to Harare from Bulawayo in what he said was a move aimed at creating synergies.
At the Zimpow analysts’s briefing held in August, Kumwenda said: “We are still looking at potential synergies. I have moved to Harare to try and work out on how things will be structured going forward.”
This resulted in the retirement of Charles Nyambuya as CEO, making way for Kumwenda.
Nyambuya had been CEO of the group since 2007.
Prior to his appointment, he was managing director of Puzey & Payne.
On the disposal of Puzey & Payne, the sources said the motoring unit could be sold to a consortium of indigenous investors but Nyambuya could be involved although this is yet to be finalised. Puzey & Payne recorded a US$731 000 loss in the year to August 31. The unit has been posting losses since dollarisation.
Unit sales for the division were 2,2 times higher on the previous year albeit on a low base.
Kumwenda had not responded to businessdigest’s enquiries at the time of going to press.
In its results for the year ended August 31, TPH revenue increased 16,07% to US$42,75 million. The company reported a 59,1% drop in attributable profit at US$691 840.
In a statement accompanying the financial results, the group said parts and service department revenue increased by 10% on last year. Earthmoving machines and lift-trucks unit sales at Barzem were 22% down on last year as customers deferred capital expenditure due to lack of clarity on the indigenisation policy.
Despite this, Barzem made a significant positive contribution to group results during the year under review.
Tractor and generator unit sales at Farmec were 10% down on last year due to low winter cropping activities.
Northmec Zimbabwe managed to break even, with tractor unit sales growing by 47% (on a comparative base) on last year.