Financial Gazette (Harare)
Kumbirai Mafunda
15 November 2007
Harare — ECONET Wireless, the country's biggest telecoms company, has shored up its shareholding in First Mutual Limited (FML) to 21.73 percent after buying out Trust Holdings Limited (THL)'s stake in the life assurer.
Econet acquired THL's shareholding in FML totalling 31.5 million shares, in a share swap deal involving the issue of 4 199 744 million ordinary shares in Econet to THL.
This means friendly institutions Econet and ReNaissance Financial Holdings Limited (RFHL) now control over 53 percent of FML, making them the majority shareholders in the company.
FML and THL announced yesterday that the two institutions, which entered into a Strategic Partnership Agreement in 2003, had amicably terminated their alliance and have now ceased to be cross shareholders.
"It is envisaged that the disengagement will create opportunities for both THL and FML to pursue separate business interests, that will add value to their respective shareholders," read part of the statement.
Econet Wireless chief executive officer Douglas Mboweni said yesterday that the deal was important for his group.
"This deal not only brings stability to FML but it also means that we can help the company to expand and realise its full potential. We are very happy to partner with ReNaissance in this business because they are very capable business people," he said.
Under the initial Strategic Partnership Agreement between FML and THL, Trust acquired shareholding in FML while FML had in turn purchased shareholding in THL and its subsidiaries.
The transaction effectively kills speculation of a hostile take-over, which has hounded FML for years. It also puts to rest a legal battle, which had been brewing between FML and THL.
FML, which held a 25 percent interest in THL was incensed by its former partner in September after THL vowed to proceed with the convoluted sale of its three units despite resistance from other shareholders.
An FML executive told The Financial Gazette this week that the THL/Econet deal, which went through the Zimbabwe Stock Exchange (ZSE) last Friday, has helped the group strike a balance between retail investors and corporate institutional investors in its shareholding structure.
The official said unlike retail investors, institutional investors have the capacity to strengthen FML and hold its management accountable, which can only improve the life assurer's operations.
"It strengthens our shareholder profile and further enhance its (FML) attraction as a safe investor destination. It also brings stability and certainty into the business," said the official.
In Econet, which has a presence in a number of African countries, FML can piggyback on the telecoms company's cash-rich status. Discussions are already taking place for FML to ride on the back of Econet's international operations to enter markets such as Nigeria, and Kenya.
The deal is a major coup for RFHL, coming after the ZSE thwarted RFHL's attempts to acquire a controlling stake in FML by reversing his banking operations into the company
Now, RFHL not only achieves its objective of controlling FML, but it can also tap into the resources of Econet to help RFHL rapidly expand and develop FML.
The importance of making such acquisitions for Econet are quite clear if one looks at the company's results for the six months to August.
These show that although the telecoms giant continues to expand its network services, the contribution of telecoms to its profits have been falling because of the low tariffs allowed by government.
Over 80 percent of Econet's profits for the period now come from its non-telecoms investments.
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