Battle for CFI intensifies

Nssa, Van Hoogstraten on collision course

THE battle for the control of listed agro-processing concern CFI Holdings has intensified after the Zimbabwe Stock Exchange (ZSE) ordered two of the company’s majority shareholders to make mandatory offers to minorities, it has been established.

By Bernard Mpofu

This has resulted in the deferment of a plan by one of CFI’s majority shareholders to make a mandatory offer to buy out minority shareholders this week as the agro-processing firm seeks to maintain its presence on the ZSE.

CFI is at the centre of a corporate battle between the National Social Security Authority (Nssa) and ZimRe Holdings in one corner, and controversial British tycoon Nick van Hoogstraten, who has vast investments in Zimbabwe.

Stalap, an investment vehicle jointly owned by Nssa and ZimRe, is obliged to make a mandatory offer after CFI announced in March that it now owns 41% in CFI. This exceeds the ZSE listing rules which state that no single shareholder should exceed 35% in a quoted company.

The ZSE requirements also state that a listed company should not have less than 300 shareholders and at least 30% of the company’s issued share capital should be held by the public.

The mandatory offer to the minority shareholders to buy out their shares in Stalap will be at a cash offer of US$0,22 per CFI share held as the record date. The offer is expected to open this coming Monday and close on July 31.

Documents seen by the Zimbabwe Independent show that on Monday this week, the ZSE listing committee scuttled Stalap’s plans when it ordered Messina Investments, a company owned by van Hoogstraten, and Stalap to make the mandatory offer to minorities at the same time.

“The committee noted that there is another CFI shareholder, Messina Investments (Pvt) Limited, which now holds shareholding beyond 35% and is also obliged to make a mandatory offer,” ZSE acting CE Martin Matanda wrote. “As a result of the above, the committee resolved that Messina and Stalap should make the mandatory offers simultaneously.

The ZSE will inform Messina of the aforesaid committee resolution and will be in further contact with yourselves.”

Stalap, through its stockbrokers FBC Securities, immediately responded to the ZSE resolution, saying the decision would prejudice it.

“We write on behalf of our client, Stalap Investments (Pvt) Ltd, to express concerns raised by the letter received and urge the committee to reconsider the resolution taken that Stalap must delay publication of its mandatory offer to CFI minority shareholders until an offer is also ready to be made by Messina Investments Limited who we understand has since reached 35% threshold triggering a separate mandatory offer,” FBC wrote in a letter dated July 4.

“The ZSE Listing Requirements do not specify that two mandatory offers be made at the same time and we therefore request the ZSE to indicate according to which section of the listing requirements this resolution has been made.”

Stalap also questioned why the ZSE decision did not specify the exact timeframe within which a mandatory offer should be made, arguing that this delays the company’s transaction indefinitely.

Stalap is of the view that the mechanics of a joint offer are unclear and wants to know, for example, at what terms and pricing the offer will be made.

“What would be the mechanics for minority shareholders accepting the offer? Would minority shareholders be allowed a choice of which party to sell to?” Stalap asked. “Further, a variety of parties involved in this transaction are privy to price-sensitive information as a result of the circular being under review (including the advisors, the board and management of CFI and the ZSE members) which will create information asymmetry.

“It has been noted with concern that there has been an unusual increase in both the volume and pricing of traded CFI shares during the period when the company has been trading under caution and, in particular, during the month of June 2017 when the circular was in the process of being finalised.

“We would request that the ZSE review transactions in CFI shares during this period to ensure the parties involved have traded in compliance with the ZSE Listing Requirements and the appropriateness of transactions from the perspective of protection of minority shareholder interests in light of a pending mandatory offer.”

In February, Public Service minister Prisca Mupfumira and Finance minister Patrick Chinamasa approved Nssa and ZHL’s strategy that resulted in the two entities gaining control of CFI through Stalap.

According to the Public Finance Management Act, any purchase or disposal by Nssa of more than 10% shareholding in any entity requires approval from both ministers.

Nssa exchanged its 12,89% stake in CFI for a 31,426% stake in Stalap in order to create a 41% equity block in CFI which has more control. This came after Nssa rejected an offer by van Hoogstraten for Nssa-held shares in CFI.

Post the consolidation with Nssa support, Stalap supported CFI’s US$12 million rights offer.

Since dollarisation CFI has experienced operational difficulties. Attempts to re-capitalise the business have been unsuccessful largely because of shareholder differences on the timing and mechanism of any capital raise. But recapitalisation capacitated Farm and City to reclaim lost market share and expand its distribution network.

Failure by the business to raise fresh capital has, among other things, resulted in the placement of two of its key subsidiaries (Victoria Foods and Agri-Foods) under judicial management.

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