16 December 2010

Zimbabwe: FBC Gets Reprieve

THE Reserve Bank of Zimbabwe has extended the period over which FBC Bank can hold on to its shareholding in the three listed subsidiaries of SMM Holdings to next year, a senior official has said.

FBC Holdings deputy chief executive Mr John Mushayavanhu, who is also the managing director of FBC Bank, yesterday said the central bank had extended the period by another year.

"We had sought for an extension from the Reserve Bank of Zimbabwe and it was granted," said Mr Mushayavanhu.

He added that FBC is not in a hurry to dispose of the shares because they have to dispose them at a fair value.

FBC gained control of 60 percent in Turnall, 19 percent in General Beltings and 30 percent in Steelnet after SMM failed to settle a US$8 million loan borrowed from the African Export and Import Bank three years ago.

FBC decided to seek extension after realising that getting a buyer for the stake might be very difficult given the liquidity challenges on the market and might also want to dispose this shareholding at a premium.

The bank is required by law to dispose of such interests within one financial year from the day of acquisition.

SMM administrator Mr Afaras Gwaradzimba had borrowed the money, which came through FBC Bank, and pledged some SMM shares in the three subsidiaries as security to the loan.

However, SMM failed to settle the debt, resulting in the transfer of SMM shares from the three companies -- all listed on the Zimbabwe Stock Exchange -- to FBC.

Meanwhile, FBC Holdings yesterday announced the acquisition of a 49,2 percent stake in Eagle Insurance Company of Zimbabwe from Zurich South Africa in a cash transaction valued at US$650 000.

The transaction has brought FBC's shareholding in one of the biggest insurance companies in the country to 72,5 percent. FBC Reinsurance had a 23,3 percent shareholding.

Group chief executive officer Mr Livingstone Gwata said there were exciting ideas and projects to aggressively grow this business.

Eagle Insurance, valued just above US$3 million, requires approximately US$1 million to revive the business of underwriting bigger businesses.

"Direct insurance complements our business model and we are delighted about the acquisition of Eagle Insurance.

"We believe that we are strategically in a much better position to invest and to unlock significant value for the shareholders through this business," said Mr Gwata.

Mr Pieter Bezuidenhout, chief financial officer of Zurich South Africa, said the transaction was in line with the country's indigenisation laws that allow foreign partners to hold not more than 49 percent shareholding in companies worth US$500 000.

Other shareholders include Zimre, which controls 23,3 percent.

FBC's involvement in the insurance industry to date has been through FBC Reinsurance, but the acquisition of Eagle Insurance will give it a direct foothold in the industry.

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