Meikles Ltd CEO Brendan Beaumont told the Zimbabwe Independent that Kingdom Financial Holdings Ltd had not paid his group US$22,5 million that would have resulted in Chanakira regaining control of the financial group.
Beaumont said as a result KFHL would remain a “subsidiary” of Meikles Ltd after a deadline for formal demerger passed on Monday with no sign of payment from Chanakira, one of Zimbabwe’s celebrated success stories
“Until the de-merger’s condition precedents have been met and the de-merger has been implemented Meikles shall remain Kingdom’s controlling shareholder and it follows that Kingdom currently remains a subsidiary of Meikles Ltd,” said Beaumont.
“The Board of Directors had undertaken to report to shareholders on the Kingdom Financial Holdings (Kingdom) de-merger by 31 May 2010, following the failure by Kingdom to fulfil the de-merger’s condition precedents as approved by shareholders on 22 June 2009 and the lapse of the shareholder agreement on 21 April 2010,” he said.
KFHL merged with Meikles Africa Ltd in November 2007 to form KMAL, to create an empire that spanned hotels, banking, retail and agricultural sectors.
But the business marriage went sour after John Moxon, a former KMAL chairman, attempted to eject three directors appointed by Chanakira from the board early last year.
After Moxon and Chanakira’s relationship soured, the two resolved to de-merge KMAL on condition that Moxon would let go of his KFHL shares to Chanakira. In return, Moxon demanded US$22,5 million that his company had advanced to KFHL to meet central bank minimum statutory capital requirements for its three subsidiaries –– Kingdom Bank, Kingdom Asset Management and then Discount Company of Zimbabwe (DCZ). But after DCZ returned its licence to the Reserve Bank of Zimbabwe, KFHL used only US$13,5 million of that amount to fund working capital requirements.
A statement issued by KFHL yesterday said the banking group was “keen” on finalising the de-merger but accused Meikles of spurning at least two offers to date.
“The KFHL Board has been consistent on this objective and in November 2009, the Group requested the approval of a new shareholder to inject equity of $10 million, which would have fulfilled the Reserve Bank of Zimbabwe capitalisation requirements and the demerger conditions precedent,” read the statement, in response to queries from the Independent.
According to KFHL, Meikles declined the US$10 million offer.
“Subsequently, KFHL restructured the Group and surrendered its Discount Company of Zimbabwe (DCZ) licence, and this together with the reduction of regulatory minimum capital requirements for asset management companies, allowed KFHL to offer Meikles $10 million repayment by way of ceding back a portion of its deposit at the RBZ. Meikles again rejected these funds as it did not want part payment of the $22,5 million,” KFHL said.
Beaumont confirmed receiving offers from KFHL. He said Meikles received three proposals just this week
Last night, he dismissed the offers as “not making sense”
“There is no deal on the table. It is incorrect to say we rejected an offer from KFHL. There has been no offer that makes sense to the board from them. We still have a 100% shareholding in Kingdom and have been trying to find an amicable way to solve this issue.”
KFHL told the Independent that it was working on raising money and said it had since March this year made significant progress in its discussions with potential investors.
“The Group will finalise the process with Meikles through an Annual General Meeting that is scheduled to be held this month,” said KFHL.
The de-merger of KMAL would result in Moxon and his family exiting KFHL while Chanakira will leave Meikles.
The Moxon family has a 43% stake in KFHL while Chanakira’s Valleyfield Investments has 6% Meikles Ltd. Chanakira will exchange his 6% shareholding in Meikles with 43% stake in KFHL.
This will leave Chanakira with a 24% stake. Moxon will sell his remaining 25% to Chanakira for US$10 million.