Published by the government of Zimbabwe
Jeffrey Gogo And Perry Kaande
15 November 2007
Harare — ECONET Wireless Holdings Ltd has grabbed Trust Holdings Ltd's contentious 14,73 percent stake in First Mutual Ltd in a share swap deal worth over $3,7 trillion.
The purchase effectively ended the four-year-old THL-FML cross shareholding affair, in a deal that had apparently gone sour. THL chairman Mr Josephat Sachi-konye said yesterday his group and FML had differed in strategies, hence the decision to go separate ways.
The Econet purchase also puts to rest much talk about the stake, which has been subject of takeover talks in recent years. FML held 25 percent of Trust Holdings in a strategic alliance concluded in 2003. Under the deal, Econet swapped 4,2 million of its issued shares in exchange for 31,5 million THL shares held in First Mutual, Zimbabwe's largest telecommunications group said in a statement yesterday.
The effective date of the transaction was October 17. Then, weighted FML shares traded at $120 000. The share swap was done in the ratio 7,5 to one, meaning for every single Econet share, the group would receive 7,5 THL shares. It was not immediately clear what percentage the swap constituted on the Econet share register. But First Mutual Life-Managed Fund held 1,66 percent of Econet at the end of December 2006. With the share exchange, Econet will now raise its cumulative equity holding in FML to 21,73 percent. Renaissance Finan-cial Holdings controls over 30 percent of FML.
These are the two major shareholders in the insurance group following the collapse of Capital Alliance several months ago, a management investment vehicle that acquired over 20 percent of the group at demutualisation in 2003. "Shareholders are advised that the directors have exercised the right conferred to them by the shareholders at the EGM held on May 31, 2007 to issue shares under their control," said Econet.
Mr Sachikonye said yesterday the pursuit of different business strategies was instrumental in the break-up. "We had been talking about it for a long time, but it was just not in the public domain. We are pursuing different strategies. It happens in business that when the way we do business differs, we go our separate ways," he said. First Mutual spokesperson Ms Ruth Ncube said: "Shareholders are advised that as a result of recent events and developments in the structures of the respective parties, THL and FML have amicably terminated the Strategic Partnership Agreement by way of a share swap that has resulted in the entities disengaging, and ceasing to be cross shareholders."
The essential terms of the original agreement were that THL would acquire a shareholding in FML with a reciprocal increase of shareholding in THL. The respective parties would also acquire shareholding in subsidiaries controlled by the other for mutual benefit. Ms Ncube said it was envisaged that the disengagement would create opportunities for both THL and FML to pursue separate business interests that would add value to their respective shareholders. First Mutual is Zimbabwe's second largest insurance company after Old Mutual while Econet is the country's biggest mobile firm. Econet shares closed unchanged at $2,8 million yesterday. FML stocks were also unchanged at $300 000.
Trust Holdings Ltd was suspended from the Zimbabwe Stock Exchange in 2004 following the placement of key subsidiary, Trust Bank, under curatorship.
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