ZB and Vin­gi­rai split im­mi­nent:

Re­la­tion­ship ir­re­triev­ably breaks down

The Sunday Mail (Zimbabwe) - - FRONT PAGE - Dar­ling­ton Musarurwa and Africa Moyo

THE split be­tween ZB Fi­nan­cial Hold­ings (ZBFH) and In­ter­mar­ket Hold­ings Lim­ited (IHL) — which have been op­er­at­ing as a sin­gle en­tity for the past 11 years — seemed im­mi­nent last week af­ter de­tails emerged that their re­la­tion­ship had ir­re­triev­ably bro­ken down.

The Sun­day Mail Busi­ness gath­ered that Gov­ern­ment, through the Of­fice of the Pres­i­dent and Cab­i­net, and, most im­por­tantly, the Re­serve Bank of Zim­babwe (RBZ) are ex­pe­di­tiously try­ing to bring clo­sure to the long-stand­ing is­sue.

Though Gov­ern­ment man­aged to forge an agree­ment with THL last year through which the lat­ter re­ceived a 19,9 per­cent stake in ZBFH, mat­ters came to a head this year as the Na­tional So­cial Se­cu­rity Au­thor­ity (NSSA) — a ma­jor share­holder in the group (37,8 per­cent) — re­sisted the pro­posed al­lo­ca­tion of a fur­ther 6 per­cent to 10 per­cent to THL.

It also forced the re­moval of three THL nom­i­nees to the group and the ap­point­ment of all in­de­pen­dent di­rec­tors.

Restora­tion of THL rights in In­ter­mar­ket and by ex­ten­sion ZBFH — through an agree­ment made on May 31, 2016 — was sup­posed to herald the ap­point­ment of nom­i­nees such as Mr Mike Ma­hachi, Mr Zororo Mu­randa and Mr Mike Manyika to the group, in­clud­ing the re­turn of Mr Nicholas Vin­gi­rai as a non-ex­ec­u­tive di­rec­tor.

But NSSA blocked the ap­point­ments and also voted for a res­o­lu­tion to in­struct THL to re­pay a US$658 699 div­i­dend that it had re­ceived from ZB on Jan­uary 23, 2017.

It is felt that such ac­tions are a re­pu­di­a­tion of the whole agree­ment struck be­tween Gov­ern­ment and THL. So, the cur­rent ZBFH board has NSSA nom­i­nees and man­age­ment. Since then, the deal has un­rav­eled. “Driv­ing THL cat­tle out of ZB kraal” THL has sought the in­dul­gence of Gov­ern­ment, which has how­ever re­ferred it to the Re­serve Bank of Zim­babwe (RBZ).

It is un­der­stood that there has been cor­re­spon­dence be­tween RBZ and THL as par­ties seek to come up with a de­fin­i­tive out­come.

By last week the cen­tral bank had held key meet­ings with stake­hold­ers.

THL is un­der­stood to be push­ing for a mu­tual separation of In­ter­mar­ket and ZB as deep-seated mis­trust has poi­soned share­holder re­la­tions.

In a let­ter writ­ten by THL to RBZ seen by this pa­per, and dated June 9, 2017, the for­mer claims that NSSA’s ac­tion to vote against some of the un­der­tak­ings made through the Gov­ern­ment-spon­sored agree­ment had made con­tin­ued re­la­tions un­ten­able.

“We do not know why NSSA would refuse to sup­port a le­git­i­mate Gov­ern­ment po­si­tion but we can only spec­u­late that it is a case of in­for­ma­tion asym­me­try. Per­haps Gov­ern­ment ought to share more in­for­ma­tion on the In­ter­mar­ket/ZB dis­pute with NSSA for them to ap­pre­ci­ate why Gov­ern­ment de­cided to set­tle the mat­ter out of court. . . “We have been treated with such in­dif­fer­ence that we find it dif­fi­cult to ig­nore.”

“Cru­cially, THL in­di­cated that it was not happy with some pro­vi­sions of the Gov­ern­ment-bro­kered agree­ment, but was pre­pared to over­look them out of “re­spect” for Gov­ern­ment’s ef­forts,” THL said in the let­ter, which was also copied to the Min­istry of Fi­nance, the Min­istry of Labour and So­cial Wel­fare and chief sec­re­tary to the Pres­i­dent and Cab­i­net.

Most crit­i­cally, THL notes that the re­jec­tion of the agree­ment by NSSA has af­forded it the op­por­tu­nity to “deal with this mat­ter in a more tra­di­tional and con­clu­sive way: that is “driv­ing our cat­tle out of ZBFH’s kraal”.

Per­haps most sig­nif­i­cantly, the let­ter seeks RBZ’s push through two key is­sues: the re­fund of the div­i­dend “er­ro­neously” owed to Gov­ern­ment, and the re­turn of In­ter­mar­ket to THL.

The lat­est let­ter fol­lows three sim­i­lar cor­re­spon­dents with the cen­tral bank on March 20, March 24 and April 19 this year. How can separation be pos­si­ble? There are how­ever ques­tions of whether the separation is even pos­si­ble con­sid­er­ing in­ter-party trans­ac­tions and re­la­tions

be­tween the two en­ti­ties un­der ZB. How­ever, THL main­tains that with the help of an in­de­pen­dent trans­ac­tion ad­vi­sor, the two con­stituent el­e­ments of the cur­rent group can walk dif­fer­ent paths.

It is be­lieved that the busi­nesses are sep­a­rately li­cenced and have dif­fer­ent ad­min­is­tra­tive struc­tures, which can make the process both “straight for­ward” and “quick”.

Vin­gi­rai’s take

In a wide-rang­ing in­ter­view last week, Mr Vin­gi­rai re­fused dis­cuss about the cur­rent ne­go­ti­a­tions de­spite be­ing con­fronted by facts about the let­ter.

He how­ever noted that THL had com­pro­mised to take up the cur­rent share­hold­ing in the group — which it feels is rel­a­tively less than it is en­ti­tled to — sim­ply out of re­spect of the ef­forts that Gov­ern­ment had in­vested to sort out the messy af­fair.

He in­di­cated that from the out­set, THL has been ques­tion­ing the “pur­ported merger”, which “in­ex­pli­ca­bly” gave away In­ter­mar­ket to its ri­val — ZB. Ac­cord­ing to the banker, the deal had been “sur­gi­cally con­trived” since the fi­nan­cial in­sti­tu­tion — in di­rect con­tra­ven­tion of Bank­ing Act — was the val­uer, ad­viser and ac­quirer.

More es­pe­cially, THL ques­tions how the ZB board, which was push­ing for the deal, could be the very same board that pre­sides over the ap­proval of the same.

“Our view is that the pur­ported merger should be re­versed be­cause it of­fended the pro­vi­sions of the Ar­ti­cles and Me­mos of IHL. In essence, ZBFH must hand back what it took il­le­gally. An il­le­gal­ity can­not be cured can it? . .

“I am yet to un­der­stand how ZBFH came to con­trol IHL well be­fore the pur­ported merger.

“More im­por­tantly, I want some­one to ex­plain to me in sim­ple terms how ZBFH, be­ing the “ac­quirer,” was also the trans­ac­tion fi­nan­cial ad­viser, and man­age­ment of IHL. Yes, ZBFH pre­pared the man­age­ment ac­counts of IHL, pro­ceeded to pre­pare a val­u­a­tion of IHL and then “ac­quired” it!

“The same Board which rec­om­mended to ZBFH that it was in its in­ter­est to ac­quire IHL turned around, sat as the IHL Board and rec­om­mended that it was in its in­ter­est to be ac­quired by ZBFH. You can see that the whole saga was sur­gi­cally con­trived,” said Mr Vin­gi­rai. THL be­lieves it can be able to stand on its own since it has a “sig­nif­i­cant as­set base and clien­tele” made up of ZB Rein­sur­ance, ZB Build­ings So­ci­ety, ZB Life, Mashona­land Hold­ings and In­ter­mar­ket Bank­ing Cor­po­ra­tion. On the other hand, ZB, with the sup­port of cash-rich NSSA, has the in­sti­tu­tional frame­work and sup­port to clean its bal­ance sheet and move on.

A key ar­gu­ment of Mr Vin­gi­rai is that be­fore the 2006 scheme of ar­range­ment, it was only In­ter­mar­ket Dis­count House (IDH) whose liq­uid­ity po­si­tion had been com­pro­mised and it was there­fore im­proper to in­clude the whole group un­der scheme.

He also says if that were to be the case, an in­de­pen­dent trans­ac­tion ad­viser ought to have been roped in for the scheme.

Most no­tably, Mr Vin­gi­rai notes that it is crit­i­cal to sep­a­rate him and IHL as two dis­tinct le­gal per­sonas whose cases had a dif­fer­ent bear­ing to the fate of his busi­ness em­pire.

It is there­fore his rea­son­ing that since THL’s share­hold­ing in IHL re­mained un­con­tested, its en­ti­tle­ments such as div­i­dends within the merged group must have been re­spected. But this did not hap­pen. Mr Vin­gi­rai said: “IHL’s fi­nan­cial state­ments show that IHL paid div­i­dends but THL never re­ceived its share. Cer­tain busi­ness lines con­ducted by IHL en­ti­ties were col­lapsed into ZB Bank, for ex­am­ple, the dis­count house ac­tiv­i­ties and pri­vate bank­ing.

“This di­ver­sion of in­come from IHL to ZB Bank­ing un­duly prej­u­diced THL to this day. In ad­di­tion to this, ZBFH over­bur­dened IHL with ar­bi­trary charges,” added the banker.”

THL said although it was keep­ing its op­tions open, it was “in­fin­itely bet­ter” to come to a mu­tual agree­ment.

RBZ on the case

At­tempts to get a com­ment from RBZ Gov­er­nor through­out the whole of last week were not pos­si­ble. How­ever, Deputy Gov­er­nor Dr Kupuk­ile Mlambo in­di­cated: “That one is han­dled in the Gov­er­nor’s of­fice di­rectly. I know he has been meet­ing them; this week (last week) he met them and cou­ple more meet­ings, but I have no idea what is go­ing on.

“That one we can’t dis­cuss it un­til they fi­nalise.”

ZBFH group chief ex­ec­u­tive of­fi­cer Mr Ron Mu­tanda­gayi said he could not dis­cuss share­holder is­sues.

“Those are share­holder is­sues. I dont even know that there are those sorts of talks. Even if I did, it’s not in my place to com­ment on those is­sues. I am afraid I am not go­ing to be help­ful, I wish I could,” he said.

Last week, NSSA chair­man Mr Robin Vela in­ti­mated that the Au­thor­ity will be amenable to any mu­tu­ally-agreed out­come.

“I am aware that let­ters have been writ­ten to Gov­ern­ment and to the Gov­er­nor. We will look at the deal on its mer­its and we will say what is the value here of In­ter­mar­ket ver­sus share­hold­ers? If it makes sense for us; we are not try­ing to be an­tag­o­nis­tic, we also want to move for­ward. But we would want a deal that works for ev­ery­body. “

See also Nicholas Vin­gi­rai Q& A on Page B8

Mr Ron Mu­tanda­gayi

Mr Nicholas Vin­gi­rai

Newspapers in English

Newspapers from Zimbabwe

© PressReader. All rights reserved.