THE merger between Delta Corporation and Schweppes Zimbabwe Limited (SZL) could take a bit longer amid revelations two South African firms are claiming ownership of SZL's equipment stemming from a 2003 sales agreement.

The proposed Delta-SZL marriage is before the Competition and Tariff Commission and last Friday the first meeting was held where stakeholders gave their views on the proposed deal.

Southern Asbestos Sales (SAS) and Petter Trading both in liquidation and formerly owned by businessman Mutumwa Mawere say the merger cannot go ahead as they are the rightful owners of the equipment.

Both liquidators of SAS and Petter attended the hearing and said the merger should not go ahead as they own the equipment having paid for it on behalf on Fidelity Life Asset Management (FLAM).

FLAM had in 2003 entered into a Memorandum of Agreement of Sale with CCCA and Schweppes Holdings Limited in which the asset managers would purchase SZL for a price of Z$1 on top of a US$5.8 million injection for equipment upgrade.

The upgrade had to be completed in February 2004 for SZL to meet the international standards while CCCA had to dispose of the stake to comply with the Competition and Tariff Commission directive to localise the operation.

Because FLAM had no access to foreign currency, it turned to Mawere's Africa Resources Limited (ARL) which instructed Petter to pay for some equipment.

Letters have been flying for the past three years between CCCA and Petter for the equipment to be returned but to no avail.

In a March 30, 2006 letter to Coca Cola Company, Petter joint liquidator Harry Kaplan asked for the whereabouts of three equipment bought by Petter for SZL.

The equipments comprised of PETform System for the production of petforms, PET Blow Molding System, a technological plant for making PET plastic bottles and 4PET Bottling lines.

"I believe that you may have some information regarding the whereabouts of the above mentioned assets.

"Accordingly, I would be grateful if you could kindly furnish us with the information so that we can proceed with the recovery of the said assets as expeditiously as possible," Kaplan said.

The PET form system was worth 1 662 500 Euro in 2003, the PET Blow Moulding System supplied by ADS South Africa was valued at 1 273 000 Euro while the 4PET Bottling Lines supplied by Ave Industries cost 1 734 250 Euro and Petter paid for the equipment.

Coca Cola legal counsel, Daniel Mokwena responded on April 20, 2006 saying although they were looking for documentation relating to the equipment, the equipment does not belong to Petter.

"It is our view that the assets do not belong to Petter Trading (Pty) Ltd (in liquidation) and we would appreciate to understand the basis, if any, other than the attached purchase contracts on which it is alleged that the assets belong to Petter Trading," he said.

Kaplan was not convinced insisting that the purchase contracts were between Petter and European equipment suppliers.

"We have no evidence of any third party interest in the said contracts.

"Petter Trading was at all material times a principal in the procurement of the equipment pursuant to these contracts," Kaplan said.

Investigations showed that when Mawere's empire was put under reconstruction, the appointed administrator Arafas Gwaradzimba had told CCCA to buy equipment for the mine to settle the arrear basing on the argument that since FLAM was put under his control, he had to collect money from asset managers' debtors.

The 2003 agreement involving CCCA, FLAM and Schweppes Holdings had a clause that CCCA would terminate the deal if FLAM fails to undertake the equipment upgrade in time.

Foreign currency was hard to come by and FLAM did not complete the programme as per schedule.

In a September 13, 2004 letter to FLAM chairman Solomon Tembo, CCCA wrote: "In terms of Section 10.1 of the Purchase Agreement, the Purchaser agreed to acquire and install at the company's facilities all of the equipment described in Schedule 10.1 on or prior to February 1, 2004.

"On the February 24, 2004, the seller gave the purchaser additional time to meet the performance criteria as required by Section 11.1 of the Purchase Agreement.

"As you know to date the purchaser has failed to meet the performance criteria in a timely manner."

CCCA said as per the agreement, it has rights to: (i) declare a "performance default; (ii) terminate the Bottler Agreement; (iii) to request delivery of the Escrowed Property by Escrow Agent and to transfer the shares into the seller's name and therefore becoming the sole legal and beneficial owner of the shares."

CCCA said upon delivery of the Escrowed Property to the seller, the purchaser shall be obligated to fully discharge, with its own funds, any and all liabilities incurred by the company subsequent to the closing date.

"In terms of the Purchase Agreement the seller is obliged to furnish the purchaser with 15 days to remedy the above mentioned breach.

The seller hereby gives written notice to the Purchaser to remedy the breach by 30 September 2004, failing which the Seller will be left with no option but to terminate the Purchase Agreement," it said.

Tembo responded three days later.

"The Purchaser through SMM Holdings (Private) Limited has already spent a significant amount towards the re-equipment of the Schweppes factory.

"As you might be aware SMM Holdings (Private) Limited was specified by the Zimbabwe government and put under an administrator on September 2004," Tembo wrote.

"Effective from that date according to Zimbabwean laws all transactions that SMM Holdings (Private) Limited is involved in now have to be referred to the Administrator.

"We are therefore in consultation with the SMM Holdings (Private) Limited Administrator, Mr. Gwaradzimba on how we should proceed with respect to this matter."