The Zimbabwe Independent

Cautionary statement influx reflects sign of the times

- Kudzai Kuwaza

COM PANIES 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.”

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