Financial Gazette (Harare)
Dumisani Ndlela
27 June 2009
Harare — INSURGENT LonZim Plc shareholders have escalated their battle against four of the group's directors, issuing an announcement that is likely to dismantle any defence that has so far provided them with ammunition against a planned vote of no confidence from shareholders.
In an announcement made to shareholders of the London-listed, Zimbabwe-focused group, AMB Ireland raised a number of startling issues it said "should be of concern to all LonZim shareholders".
Among these are allegations of blatant conflict of interest between parent firm, Lonrho Plc, and the LonZim directors, as well as a significant dilution of shareholder value in LonZim since listing.
The allegations are likely to stir anger among LonZim's shareholders, and might suggest why LonZim directors have balked at calling for an extraordinary general meeting (EGM) called for by AMB on the issue.
AMB, a beneficial owner of a 22,12 percent stake in LonZim, requested the EGM on April 24, 2009. LonZim directors had stated that the EGM would be held in June, but no such meeting has been called for by the LonZim board.
AMB -- which is supported in its battle by Damille Partners 1V, which has a 6,46 percent stake LonZim -- has proposed the removal of four existing LonZim executive directors, as well as a change in the company's investment objective, which would provide for the sale of LonZim's Zimbabwe assets and a return of capital to shareholders. It is proposing to replace the fired directors with four nominees from itself as well as from Damille Partners 1V.
AMB accuses the directors of pursuing an investment strategy which has resulted in LonZim acquiring a number of assets it alleged were start-ups, with minimal turnover and profitability.
These, AMB said, would not meet the return expectation of LonZim shareholders if current executives are retained.
AMB also alleged that a large portion of LonZim's operational costs had on aggregate largely accrued to Lonrho's benefit and for the benefit of its directors.
It was not immediately clear how the LonZim directors were likely to respond to the damaging accusations, which are likely to significantly impact on any vote on the issue should the EGM be called and shareholders asked to decide on the issue.
But recently, it issued a writ for alleged defamation against an AMB executive.
David Lenigas, the LonZim chairman has described the proposals by AMB as "a divestment policy which is not in the best interest of shareholders".
"AMB bought its equity in LonZim at an extremely low average price of 16p/share. This is below the current market price.
"If AMB is permitted to sell the assets and return capital to shareholders, it will make a profit on its investment if it can deliver an exit price over 16p/share.
"The majority of other shareholders will not," said Lenigas in outlining his defence against the AMB bid.
But AMB noted that it had paid cash for its investment in LonZim, indicating the 20 percent initial issue of shares to Lonrho in LonZim were in exchange for a "non-compete" undertaking and not paid for in cash.
AMB alleged the writ for defamation was meant to silence "any bona fide concerns raised by shareholders and to deprive them of their democratic right to speak".
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