ZIMBABWE Stock Exchange-listed Innscor Africa Limited’s efforts to dispose of its 25% shareholding in refrigerator maker Capri suffered a major blow after the Competition and Tariff Commission (CTC) rejected the transaction.
Innscor sought to dilute its shareholding in Capri from 50,1% to 25,05% then down to 25%, so that the group can focus on light manufacturing in consumer goods
Innscor controls 50,1% in Capri through its investment vehicle Skitap while the remainder is held by Catterson Marketing.
According to information at hand, Innscor intended to swap its 50,1% shareholding in Capri for 100% shareholding in Skitap, its investment vehicle in Capri.
Further, Skitap would sell 0,1% of Capri to Catterson Marketing such that shareholding in Capri is equally divided between Catterson and Skitap at 50% each.
Thereafter, a Mauritius-based investment holding entity called SSCG Africa Holdings through its vehicle Annunaki Investment would acquire 50% of Skitap, thus acquiring indirect 25% shareholding of Capri.
But well-placed sources told this publication that an investigation into the deal was completed and, after the CTC board convened recently, a unanimous decision to block the transaction was made on the basis that the involved parties failed to meet the requisite guidelines.
“They were penalised for late notification. A notification (application for go-ahead) should be done within 30 days after signing an agreement, which they didn’t do,” a source said.
It is understood that Innscor notified the CTC after the lapse of the recommended period in November last year after reaching an agreement with Annunaki in July 2018.
According to section 34 (a) of the Competition Act, a party to a notifiable merger is required to notify the commission in writing of the proposed merger within 30 days of the conclusion of the merger agreement between the merging parties; or the acquisition by any one of the parties to that merger of a controlling interest in another.
The Act stipulates that failure to give notice of the merger or proceeding to implement the merger without the approval of the commission attract a penalty not exceeding 10% of either or both of the merging parties’ annual turnover in Zimbabwe as reflected in the accounts of any party concerned for the preceding financial year. Innscor’s total revenue for 2018 was ZW$1,28 billion. For the half-year period ended December 2019, the group posted revenue of ZW$4,268 billion.
Efforts to get comment from Innscor were fruitless at the time of going to print.The CTC confirmed handling the transaction.
“Stakeholder consultations are ongoing. The Commission is still at stakeholder consultations stage,” CTC director Ellen Ruparanganda said in emailed responses.
Contacted for comment, SSCG official Edward Leared declined to disclose the details of the transaction.
“Look, I am not allowed to speak on behalf of the company. Let me ask my superior if they can help. But for now I cannot help,” Leared said.
The SSCG deal was geared towards channelling fresh capital into the refrigerator-making company.
“So the expectation was that the transaction will benefit Capri through provision of fresh working capital required to import refrigerator essential components from SSCG,” a source said.
The SSCG has been growing its local portfolio in several businesses in diverse sectors and seeks to grow its footprints in light manufacturing with a view to reaping from the investments in the medium to long-term.
The investment was intended to provide support to Capri so that jobs are preserved and ensure the continuation of the Capri brand’s legacy in Zimbabwe.
Capri is the largest refrigerator manufacturer in the country followed by Imperial.
In 2013, the CTC slapped Innscor with a US$2,5 million penalties over its acquisition of 49,9% shareholding in National Foods which it said was in breach of notification provisions.
Founded in 1987, Innscor operations comprise National Foods Holdings Limited, Colcom Holdings Limited, Irvine’s Zimbabwe (Private) Limited, bakeries, appliance manufacturing, Natpak (Pvt) Limited, Profeeds (Pvt) Limited and Probrands (Pvt) Limited.