Tanganda will lift ZSE, shareholders’ value

EVERY weekday, around 7:15am, on Capitalk FM, they play a Tanganda tea advert. The advert’s pay-off line says, “it lifts you up”. The tag-line is used by the company as a branding slogan. The idea behind the concept of using pay-off lines is to create a memorable phrase that will sum up the tone and premise of a brand.

This week, Tanganda Tea Company Limited released the long awaited abridged pre-listing statement, with regards its demerger from Meikles Limited and separate listing on the Zimbabwe Stock Exchange a platform it left more than 10 years ago.

The company, together with Kingdom Bank and Meikles, voluntarily de-listed from the ZSE when they merged to form Kingdom Meikles Africa in 2007.

Tanganda plans to list on the second of December this year.

Till then, it will continue to trade under parent company Meikles Limited.

However, those willing to buy its shares, can do so through purchase of Meikles at least until November 18.

The record date is November 19, 2021. When the pre-listing statement for the demerger was released on Tuesday, just like the tag-line we started this article with,

Meikles shares got a “lift up”. On the day of the announcement, its share price went up by 13 percent. Yesterday it went up by 4,53 percent.

In my view, while there was excitement around the news, the deal was already priced in since the first cautionary about the de-listing was announced on April 15, 2021.

Meikles is already one of the best performers on the ZSE, with a year-to-date gain of 688,4 percent.

Only 11 other companies have recorded gains higher than Meikles.

This could be testimony that the price has already run in anticipation of increased shareholder value.

The company said its reasons for demerging and separately listing on the ZSE is to establish it as a dedicated stand-alone business attractive to investors and able to pursue business ventures within the value-added diversified agricultural sector in Zimbabwe.

The company believes the transaction will enable it to raise funding with conditions suitable for the type of business it is in.

It believes the demerger and separate listing, will help unlock shareholder value. This is a common reason given by most firms that take similar action.

Over the past few years, companies that have been listed after the demerger from the parent companies have created handsome returns for their investors.

Demerger is proving to be an effective means for corporate restructuring and companies that have done so are leading performing demerged stocks which have benefited the shareholders as well as the company.

One such example is the Innscor Group and the companies it demerged such as Simbisa, Axia and Padenga.

Before they demerged, the combined Group’s market capitalisation was less than that of Delta. But now, their combined market capitalisation is bigger.

Another example is Econet and Cassava. Before their demerger, their market capitalisation was less than that of Delta, but as separate companies, their market capitalisation of $316 billion is now bigger than Delta by more than 50 percent.

Delta was valued at $203 billion as at October 27, 2021.

While Tanganda left the ZSE as a tea producing company, it returns following its transformation from being just a tea business to a diversified agricultural export business.

The company says its plantation development programme is now almost complete, with a further 160 hectares of avocados scheduled over the next five years.

The full maturity of the plantations is expected to continue to transform the financial situation of the company.

The beverage division, with its drive to grow packed tea and water sales volumes and broaden supply of customer focused relevant products, is expected to continue making positive contributions to the company.

Cash flows are now evenly spread over twelve months as compared to previous years when it was concentrated over the relatively peak seven tea processing months, the company said.

The return of Tanganda, albeit by way of introduction, will certainly lift not only shareholder value for both Tanganda and Meikles Limited, but will lift the spirit on the ZSE, which has been starved of any form of listing since the listing of Cassava Smartech in 2018. Post that, the ZSE has only recorded de-listings, while two companies moved to the Victoria Falls Stock Exchange.