20 March 2013

Zimbabwe: Local Investor Eyes Zimpharm

ZIMBABWE Stock Exchange-listed health care products manufacturer and supplier Medtech Holdings is negotiating with a local company for the disposal of its remaining shareholding in Zimbabwe Pharmaceuticals.

Directors said in a statement yesterday the Medtech board had accepted a firm offer from a local company for the purchase of its stake in Zimpharm.

Medtech last year revealed plans to offload the loss-making unit and then proceeded to shut down the associate due to viability constraints.

"The possibility that the business could be sold was also announced," Medtech said. "Since then the board has accepted a firm offer from a local company for the entire stake in Zimbabwe Pharmaceuticals."

The pharmaceutical products distributor said that the offer was a nominal sum, but with certain guarantees against an historic secured debt.

But Medtech said certain regulatory and shareholder approvals are required for the transaction to be finalised.

Earlier, Medtech sold 49 percent equity of its subsidiary, Medtech Distribution, to Titanium Marketing and Distribution Limited for US$100 000.

Titanium, owned by Mr Afzal Motiwala, the chief executive of Medtech Holdings, injected US$100 000 into the company for the shareholding. Mr Motiwala was a non-executive director when he bought the company.

As part of the deal, Titanium has provided skills, debt finance, new imported product lines and unlocking shareholder value, amounting to US$800 000.

The ZSE-listed firm had last year sold a 40 percent stake of the troubled Bulawayo unit to a Dubai-registered company called Nu Age Cosmetics.

Medtech is owned 34,8 percent by Westminster Holdings, 32 percent by Titanium Marketing and Distributors and 9,9 percent by GPC Trust.

It has been a very tough operating environment for Medtech, a company as much beset by the liquidity crunch as any other in Zimbabwe.

In each instance, the company has had to dispose of its units at apparently very low prices, reflecting how the widespread liquidity crisis has haemorrhaged the health products and pharmaceuticals supplier.

In 2010, Medtech was forced to shut down its plastic and textile divisions after succumbing to a US$109 000 loss, largely weighed by lack of capital.

The group had plunged to a US$178 000 loss the previous year before funding challenges, closure of the two units and low production at Zimbabwe Pharmaceuticals conspired to affect the group's 2010 profitability.

While the company says it was forced to sell Zimpharm due to viability constraints, the group seemed to be returning to profitability in the first six months of last year when revenue shot to US$18 million from US$11,2 million in the comparative 2011 period.

Mr Motiwala had told analysts during the firm's annual general meeting that revenue in the interim had gone up by 40 percent and the manufacturing unit (Zimpharm) accounted for 10 percent of the sales.

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