First Mutual Holdings Limited (FMHL) is planning to merge Nicoz Diamond Insurance Limited (NDIL) and TristarInsurance Company Limited if its proposed acquisition of the former goes through.
The implementation of the proposed merger will depend on FMHL's ultimate shareholding in NicozDiamond after the completion of the acquisition that is expected to take up to 24 months.
The insurance firm will seek shareholder approval for the proposed acquisition, a renounceable rights offer to raise $17,25 million and the proposed merger at an extraordinary general meeting to be held on August 31, 2017.
This follows FMHL's proposed acquisition of NDIL after the National Social Security Authority (NSSA) disposed of its controlling stake in the insurance firm within nine months after boosting its equity in the company.
"Subsequent to the proposed NDIL acquisition, the board proposes to merge the operations of NDIL and
TristarInsurance Company Limited, into a single short-term insurance entity," said FML in circular to its shareholders.
NSSA is the largest shareholder in both NicozDiamond and FMHL. The merged entities are therefore expected to enjoy the benefits of having NSSA as their largest investor.
NSSA has about 70 percent of its investments in the equities market, holding interests in 53 of the 60 companies listed on the local bourse.
In light of this, the merged entity will also benefit from economies of scale by a large capital base, technology and wide delivery channel that have become critical in operate sustainably in view of the low capacity utilisation in the various sectors of the economy.
NDIL is mainly in short-term insurance sector in Zimbabwe, Mozambique and Malawi through associate companies in which it has management contracts. Subject to shareholder approval of the acquisition, FMHL will hold 80 percent of the acquired issued share capital of NicozDiamond.
FMHL will initially acquire 300 million shares in NicozDiamond, which will constitute the entire issued share capital held by NSSA.
According to the circular to shareholders, NSSA has an irrevocable undertaking to procure and deliver an additional 177 million NicozDiamond shares representing 30 percent shareholding in the company in return for 35 million new shares in FMHL.