THE past three weeks have been turbulent for the Kingdom Financial Holdings chief executive Nigel Chanakira. His plan to merge Meikles, Kingdom, Tanganda and Cotton Printers is in trouble following protests from a shareholder in Meikles Africa. Bel
ow is part of his response to questions from businessdigest. Chanakira had requested written questions.
Businessdigest: Does Kingdom have recourse if Old Mutual decides to completely block the deal as it has been doing for the past three weeks?
Chanakira: We would naturally be disappointed if any of the Meikles Africa Ltd shareholders chose not to support this transaction, as we are convinced that it is the best value proposition that has been put to any set of shareholders in our market for some time.
It offers growth in real terms and gives parties to the transaction critical mass to tackle the rigours of this economy now, and to position for much needed regional expansion.
Old Mutual, who represent their own interests and those of pensions funds which they manage, support the transaction in all respects save for their reservations on the Kingdom valuation, which reservations they are best qualified to comment on.
While we have every faith that the deal will be consummated on the basis of its merits, any business worth its salt will naturally have a strategic fallback position; possibly another means of getting to the same end! At this juncture it is premature to moot these options.
Businessdigest: This deal has been designed to meet the indigenisation criteria. In what way does it achieve this if the chief player, Nigel Chanakira, will come out of the deal with 2,5% of the new group?
Chanakira: The deal is not just about Nigel Chanakira! Kingdom has always been about wealth creation for its shareholders despite the stakes that the founder has held over the years.
Our laws in Zimbabwe are very clear that there are RBZ regulations on the ownership structure of banks and financial services.
If Kingdom was about Nigel Chanakira owning 100% of the business, then he would not be operating in Zimbabwe.
If one looks at the largest international bank in the world by assets, Citibank, there is no single shareholder who owns more than 10%. The fact that 51% of Kingdom Meikles Africa will be owned by indigenous Zimbabweans makes for sufficient comfort to me.
Businessdigest: How does Kingdom plan to address the issues raised by Old Mutual? We mean Old Mutual’s concern that Kingdom is overvalued compared to other players in the same sector?
Chanakira: You will recall that Kingdom shareholders, in their wisdom, voted to proceed with the EGM of 15 November and having done so resolved an exchange ratio of one Meikles Africa Limited ordinary share for 5,659 Kingdom Financial Holdings Limited ordinary shares.
This sent a clear message to the market despite the adjourned Meikles EGM.
Kingdom shareholders are fully persuaded about the valuation of their company whose track record from its humble beginnings is there for all to see as a public company.
Businessdigest: Kingdom has issued a statement announcing a meeting of its shareholders next week.
Does this mean Kingdom has since held talks with Old Mutual and therefore sees potential that some sort of arrangement will be reached to make the deal move forward?
Are there any talks regarding the issues at stake with Old Mutual?
Chanakira: The advisors and parties to the transaction continue to engage in search of what is hoped will be a mutually agreed position.
Businessdigest: How does this deal benefit the minority shareholder in Kingdom?
Chanakira: It is the equivalent perhaps of trading a large slice of Madeira cake for a more modest slice of a richer fruit cake.
No economy is an island, and at the same time Zimbabwe will come right. In both cases, critical mass and clout are essential to consolidate local operations and expand into the region and beyond.
The minority shareholder gets value in real terms now, but also benefits from holding a fungible stock with the proposed LSE listing and very good regional expansion prospects. For instance, FDH in which Kingdom has a 40% shareholding has been granted a banking licence, bringing to two Kingdom’s regional banking licence.
Businessdigest: How does Nigel Chanakira who is poised to become the chief executive of the new group propose to mix and manage the cultures of a banking institution, a hoteling company and a tea growing firm?
Chanakira: Meikles, Kingdom, Tanganda and Cotton Printers are well run profitable entities in their own right. Our intention is not to disrupt these operations unnecessarily. That does not rule out strategic shifts which are beneficial for the whole. These are four good businesses with loads of potential to become greater African brands. Strategically they will continue to operate as they are with specialists in their respective areas doing what they do best.
We recognise the fact that a tea estate manager many not make the best corporate banker, neither will a bank operations manager have the where with all to be a good food and beverage manager. There was never any intention to confuse role.
An investment banker by nature is involved in managing a diversified portfolio of assets and loans and so I should be able to deal with a diverse group. A learning spirit and openness will guide much of the management and leadership, especially in the short term. — Staff Writer.