West Group eyes debt-free Red Star

West Group might seek a fresh listing if acquiring the Red Star route fails, the group prefers the latter as this would be faster and cheaper.
Red Star Holdings went into liquidation after its parent company, starafrica, failed to raise funds to clear debts and inject working capital.
The group’s subsidiary, West Foods, last year bought two former Red Star branches in Harare and Bulawayo and briefly traded under this name.
But the group has since rebranded to West Star Wholesalers to consolidate group identity and distance itself from Red Star’s troubled past.
West Group chairman Mr Ken Sharpe said they would now wait to see if the liquidation of Red Star would enable them to acquire it as a debt-free entity.
He said the acquisition of the two Red Star branches was a major accomplishment upon which his firm would grow its business.
West Group has its fingers crossed that the conclusion of the Red Star Holdings liquidation will pave the way for its sale, minus its huge liabilities.
“Unfortunately, starafrica has not yet been able to complete this deal,” said Mr Sharpe, “and we are now waiting to see if the liquidation of Red Star, their subsidiary, is going to help them fulfil their obligation to us to sell Red Star Holdings as a debt-free shell. If they are not able to do this, then we will have no option but to go and do a fresh listing.”
West Group said listing on the ZSE would advance its objective to localise the shareholding of West Star by giving customers shares equivalent to 1 percent of purchases made from its wholesale outlets.
Foreign-owned firms are compelled to localise at least a 51 percent stake and the requirements become more stringent in retailing as foreigners are not permitted to invest there, as the sector is reserved for locals.
West Star is doing well, with seven branches now operational. Plans are afoot to open Chinhoyi branch before the end of this month and at least another four branches in the next six months.
West Group has its sights set on 16 new projects for this year and is confident that at least half of them would be operational in the next five years.
Mr Sharpe said the projects range in size from US$1 million to several hundred millions of dollars.
But he pointed out that despite the growth in Gross Domestic Product, the economy remained tight and consumer spending power was limited.
“The capital and debt available from banks in not what it needs to be and continued sanctions are not helping our country,” he said.
“This said, we have managed to survive another year and have initiated the early stages of many exciting projects that will start to show fruition in 2012-13.”