PG Industries Limited shareholders have approved the disposal of Manica Boards and Doors to Old Mutual Zimbabwe and the sale of the group's other non-core assets. PG's stake was diluted from 60
percent to 27 percent during the recapitalisation of MBD and the group contends that the investment in the associate is no longer of strategic importance to the building materials supplier.
Against this background, PG shareholders unanimously agreed to the resolutions tabled during the firm's Extraordinary General Meeting on December 12, including the sale of non-core properties.
"Accordingly, the directors are proceeding to implement the resolutions," PG said in a statement yesterday.
The directors of PG had earlier said MBD was unlikely to declare a dividend beneficial to the group in the next five years.
PG said failure to approve the transaction would worsen the working capital position of its unit, PG Merchandising, which would continue to underperform.
High interest cost, PG said, on the group's mostly short-term loans ranging between 18 percent and 22 percent, would also continue to weigh down its financial performance.
PG said its investment in MBD had a book value of US$3 million and also expected to recover the US$1,3 million loan it had earlier advanced to its associate. After the purchase, Old Mutual will have a controlling 69 percent stake in MBD while PG Bison Africa will hold the remainder.
"It is anticipated that MBD will not be in a position to declare a dividend, which would directly benefit PG Industries' Zimbabwe cashflows until four or five years after recapitalisation," PG said earlier in a circular to shareholders.
PG expected to raise US$5,1 million from the disposal of commercial and industrial properties.
The properties were non-core, excess the group's operational requirements and generated insignificant returns.
Directors believe the transaction would reduce the group's debt by US$4,5 million to US$6,3 million, payable by US$10 million from US$14 million, and working capital by US$4 million after the restructuring.
This would also whittle down the finance costs PG pays annually from US$2,2 million in 2012 to about US$960 000 by 2014. But even after the disposals, working capital would remain well below the required amount by at least US$2,8 million.