COMPANIES are strategically aligning themselves in light of the advent of the Covid-19 scourge and the evolving economic environment as evidenced by the influx of cautionary statements by listed companies .
A number of companies including Dairibord Zimbabwe, Medtech, starafricacorporation and Nampak have issued cautionary statements in recent weeks.
After months of issuing a number of cautionary statements Dairibord Zimbabwe — the major producer of dairy products — revealed this week that it is in merger talks with Dendairy.
“Further to the cautionary announcement published in the press on 1 July 2020 and subsequent updates on 22 July 2020, 13 August 2020, 4 September 2020, 25 September 2020, 16 October 2020, 6 November 2020 and 27 November 2020, shareholders are advised that Dairibord Holdings Limited is still in discussion with an unlisted entity (Dendairy [Pvt] Ltd), for a merger and acquisition transaction,” Dairibord said in its further cautionary statement this week.
“If successfully concluded this transaction will have a material effect on the price of the company’s shares, the full impact of which is still being determined” Medtech has revealed that it is looking to buy a stake in a private company, the identity of which it did not reveal in yet another cautionary statement this week.
“Further to the cautionary announcement dated 24 November 2020, shareholders are advised that discussions, which involve a potential series of transactions at holding company level, to transform Medtech into an investment holding company with the economic rights to separate investments or portfolios of investments belonging to the owners of different classes of shares are ongoing,” the company revealed.
“The company is also involved in discussions to purchase a minority stake in a private company, the economic rights to which would belong to a separate class of shares and which would constitute category 1 transaction in term of SI134 of 2019(the listing rules).”
Economist and Zimbabwe National Chamber of Commerce chief executive, Chris Mugaga said there are a number of reasons why there has been an influx of cautionary statements.
“The cautionary statements could be a sign that listed companies are willing to be transparent about developments on the capital markets,” Mugaga said. “It could be that companies are restructuring and reconsolidating their balance sheets in the face of the new normal brought about by Covid-19. It could also be that companies are repositioning themselves for the African Continental Free Trade Area which will break down barriers and increase competition for local companies.”
Confederation of Zimbabwe Industries chief economist Tafadzwa Bandama said the cautionary statements could signal companies repositioning with the vastly changed environment brought about by Covid -19. “Cautionary statements may signify that something is about to happen to the company, which might be the selling off a division or unit or mergers and acquisitions, which affect share price,” she said. “Given the environment I think the cautionary statements show that companies are restrategising.”