CBZ to acquire 31,22pc stake in FML

Tapiwanashe Mangwiro Senior Business Reporter

Zimbabwe’s largest banking group, CBZ Holdings Limited (CBZHL), intends to expand its  footprint in the financial sector by acquiring a 31,22 percent stake in First Mutual Holdings Limited (FMHL).

CBZHL will hold an extraordinary general meeting (EGM) on January 31, 2022 to this effect to seek approval from shareholders for the transaction. 

The group’s board of directors has agreed with the National Social Security Agency (NSSA), to buy the State pensions entity’s stake in FMHL, according to a circular released by the  company.

The total purchase consideration for the transaction has been agreed at $6,356 billion, equating to $28 per FMHL ordinary shares, excluding transaction costs. CBZHL is looking to acquire 226 997 219 million FMHL                                  shares.

Group legal corporate secretary Rumbidzayi Angeline Jakanani said in a statement after realising the potential synergistic opportunities between CBZHL and FMHL, the board approved the company’s formal bid for the acquisition of the equity held by NSSA in FMHL.

“In June 2021, the company emerged as the highest bidder and was, therefore, granted the opportunity to enter into an agreement with NSSA for the acquisition of their 31,22 percent equity stake in FMHL,” she said.

As part of the payment, 30 percent of the total consideration of $1,9 billion to be settled in cash, comprises $1,8 billion — being the net cash proceeds due to the State pensions authority after trading transaction costs of $91 million.

The net cash proceeds due to NSSA of $1,8 billion translates to US$21,2 million after conversion at the agreed exchange rate of $85,6402  per US dollar.

An amount of $10 million, out of US$21,2 million, will be paid within ten days of the fulfilment or waiver of the conditions precedent, while the balance of US$11,2 million would be paid over eighteen months in three equal instalments of US$3,7 million payable after every six months, with effect from the payment of the aforesaid deposit.

The remaining 70 percent of the total consideration, that is, $4,4 billion would be settled through the issuance of 46,8 million new CBZHL ordinary shares to NSSA on the basis of 28 CBZHL ordinary shares for every 95 FMHL ordinary shares.

The FMHL acquisition shares in the banking group will constitute 8,23 percent of the CBZHL’s total issued ordinary shares after the transaction.

“The board monitors domestic and regional trends as well as the commercial landscape to anticipate future customer needs and identify potential growth opportunities. 

“The board is convinced that the proposed transaction is an investment in a future market leader in a business with complementary capabilities to CBZHL,” she added.

CBZHL operates within four main clusters, namely the banking cluster, insurance cluster, investment cluster and agro-insurance cluster while FMHL has diverse interests in Insurance, Funeral Services and Microfinance.

“A study of the FMHL business model presents a natural fit between FMHL and CBZHL. FMHL is a business that has also been growing over the last few years and, like CBZHL, is on the precipice of achieving true market domination.

“FMHL has begun expanding its operations into the region and is poised to become one of the dominant players within the SADC region.

“Furthermore, FMHL has a highly talented team of managers who have established themselves as the leading minds in their field. 

“The value of these resources cannot be overemphasised.

“Strong partnership with a like minded institution with deep pockets and access to significant funding lines is precisely what is needed to fully unlock the significant reserves of value that reside in this business and execute the regionalisation strategy of the business,” the bank said on the rationale of the  transaction.

According to Ms Jakanani, the pricing of the proposed acquisition of the ordinary shares in FMHL has been adjudged to be fair and reasonable by the independent financial advisors, BDO Tax and Advisory                                              Services.

CBZHL currently holds 3,23 percent shareholding in FMHL, through a special purpose vehicle called PIM Nominees (Private) Limited and the acquisition of the additional shares from NSSA constituting 31,22 percent of the issued ordinary shares of FMHL will take CBZ Holdings Limited’s total shareholding to approximately 34,45 percent.