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Business Writer
Seed Co International shareholders will next week vote on the proposal to acquire the entire share capital of Zimbabwe Stock Exchange-listed entity Seed Co Limited through an open market offer.
The transaction will be more of a reverse acquisition as Seed Co Limited is the second largest shareholder of Seed Co International Limited (SCIL) with a 27.3 percent stake.
Interestingly, SCIL was carved out of Seed Co Limited and was listed separately on the Botswana Stock Exchange (primary listing) and the Zimbabwe Stock Exchange (“ZSE”) (secondary listing) in October 2018.
However, developments on the Zimbabwe currency front, where dual listed stocks, Old Mutual in particular, was said to be prone to use in currency manipulation, resulted in the forced delisting of SCIL from the ZSE and subsequent listing on the Victoria Falls Stock Exchange (VFEX). According to SCIL’s board, its listing on the VFEX stock exchange is, however, of no value as the capital raise for regional operations can be done on the BSE.
Further, the provisions and incentives captured in Zimbabwe’s SI 196 of 2020 have been designed to make the VFEX a platform for mobilising fresh hard currency capital for deployment mainly into Zimbabwean operations, said SCIL in a Circular to shareholders.
This would present challenges to SCIL with no underlying Zimbabwean operations, to justify raising any capital on the VFEX for deployment outside Zimbabwe.
According to the Company, these unfavourable prospects are likely to curtail the attractiveness of SCIL’s secondary listing on the VFEX with a negative effect on liquidity and price discovery to the detriment of existing Zimbabwean investors, who include pension funds and private individuals.
The Board also believes having only one of the entities, SCIL, on the VFEX trading in US$ while leaving the other, SCL on the ZSE trading in Zimbabwe dollars will not protect value for the Shareholders.
Given the issues raised above, and in pursuit of SCIL’s grand strategy of becoming a truly “African Seed Company”, the Board is proposing to acquire the entire issued shares of Seed Co Limited to make it a wholly-owned subsidiary.
Current Seed Co Limited shareholders will then be issued with SCIL shares.
The swap ratio will be 1 SCIL ordinary share for every 0.98 Seed Co Limited shares held.
Seed Co Limited will then be delisted from the ZSE while the newly merged company will now be listed on the BSE and VFEX.
SCIL management argues that the integration of the Zimbabwean operations will make SCIL’s profile on the VFEX comparable to its dual listed counterparts whose make up comprise both international and Zimbabwean operations.
The transaction will also see SCIL’s net asset value per share increase from US$0.19 to US$0.20 after the successful consummation of the Transaction. The Proposed Transaction is subject to regulatory approval including approvals from Exchange Control Authorities of Zimbabwe as well as the Competition and Tariff Commission of Zimbabwe.
Bongani Ndlovu