8 August 2017

Zimbabwe: ZSE Investigates Toxic Cfi Deal

The Zimbabwe Stock Exchange (ZSE) is investigating conglomerate CFI Holdings following several trades that resulted in significant share price movements amid concerns that one of the majority shareholders could have been prejudiced.

CFI is at the centre of a fierce corporate battle between the National Social Security Authority (Nssa) and ZimRe Holdings in one corner and controversial businessman Nick van Hoogstraten at one end.

Stalap, an investment vehicle jointly owned by the Nssa and ZimRe, is obliged to make a mandatory offer after CFI announced in March that it now owns 41% in CFI. This exceeds the ZSE listing rules which state that no single shareholder should exceed 35% in a quoted company.

The ZSE requirements also state that a listed company should not have less than 300 shareholders and at least 30% of the company's issued share capital should be held by the public.

The mandatory offer to the minority shareholders to buy out their shares in Stalap will be at a cash offer of US$0,22 per CFI share held as the record date. The offer opened mid-July after the ZSE approved the exercise and closed on July 31.

As the markets opened on the first day of the previous week, CFI suddenly was an investors' favourite pushing its share price.

A fortnight ago, the stock gained 20% to close at 21 US cents from 18 US cents. Only 50 shares valued at US$11 were traded on the day in question and remained stagnant in Tuesday's trade.

Several days later the counter gained 19,9% to close at 25,90 US cents, an amount above Stalap's offer price of 22 US cents.

This development is understood to have riled Stalap which is offering US$0,22 cents per share to minorities.

ZSE acting chief executive Martin Matanda told the Zimbabwe Independent that the exchange is looking into the matter.

"On a regular basis the ZSE and SECZ share surveillance data gleaned from trading sessions and this includes share price movements.

"The ZSE trading system restricts price movements within 20% up or down on the weighted average price established at the previous session and this control is consistently applied," Matanda said.

"With regards to CFI Holdings share price movements, the concern appears to be more to do with the identity of the parties who traded. This is under review and we will be providing comments to the client concerned through their stockbroker."

As the battle to control the agro-industrial concern escalated, Van Hoogstraten through his Messina Investments, came out guns blazing discouraging shareholders from selling their shares to Stalap. He instead encouraged them to sell their shares to Messina Investments.

"We urge all minority shareholders not selling their shares, but to support us in the reversal of Langford Estates land sale and in combating the further destruction of shareholder value that a return to Zimre/Nssa would entail.

"In any event, the current ZSE market price is considerably higher than the offer price of 22 cents from Stalap," said Messina Investments in a statement issued yesterday.

Fidelity Life Assurance acquired Langford Farm under a US$16 million land-for-debt swap deal with CFI Holdings.

Before Stalap mandatory was approved, the ZSE listing committee almost scuttled Stalap's plans when it ordered Messina Investments to make the mandatory offer to minorities at the same time.

"The committee noted that there is another CFI shareholder, Messina Investments (Pvt) Limited, which now holds shareholding beyond 35% and is also obliged to make a mandatory offer," Matanda wrote.

"As a result of the above, the committee resolved that Messina and Stalap should make the mandatory offers simultaneously.

"The ZSE will inform Messina of the aforesaid committee resolution and will be in further contact with yourselves."

Stalap, through its stockbrokers FBC Securities, immediately responded to the ZSE resolution, saying the decision would prejudice it.

"We write on behalf of our client, Stalap Investments (Pvt) Ltd, to express concerns raised by the letter received and urge the committee to reconsider the resolution taken that Stalap must delay publication of its mandatory offer to CFI minority shareholders until an offer is also ready to be made by Messina Investments Limited who we understand has since reached 35% threshold triggering a separate mandatory offer," FBC wrote in a letter dated July 4.

"The ZSE Listing Requirements do not specify that two mandatory offers be made at the same time and we therefore request the ZSE to indicate according to which section of the listing requirements this resolution has been made."


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