50% of ZSE Money going to six Companies

HARARE – THE bulk of the money being traded on the Zimbabwe Stock Exchange (ZSE) is invested in only six companies, a move analysts said suggests that shareholders in these companies were consolidating their positions before the demerger of KMAL and new developments.

Some of the companies are Kingdom Miekles Africa (KMAL), Econet, Old Mutual and Delta whose board decisions have of late been affecting each other’s performance and strategies following the companies’ relations since the beginning of the year.

The other two companies are Innscor Africa and Art Corporation who market sources said were on an expansion drive. In the week under review, investors put in almost US$8,850 million. The bulk of the money was invested in Econet, which received 20%, followed by Art Corporation (17%), Old Mutual (10%), Delta (5,45%), Innscor (4,39%) and Kingdom Meikles 4,23%.

The previous week US$9,4 million was pumped into the market, with the same six companies receiving 49,5% of the money. As of May 15, KMAL’s market capitalisation stood at US$159 million.

There are 95 408 686 shares in issue at Econet. On Tuesday alone 1,1 million of Econet shares were traded.

“If it is one buyer, then I suspect that the buyer could be on either side of the shareholder divide, wanting to consolidate his position before the EGM and AGM for the March reporting season,” an analyst told businessdigest.

Delta this week alone traded nearly six million shares, after releasing a “pleasing” set of results last week.

Even when the market slowed down two weeks ago due to profit taking, volumes remained high as a lot of shares changed hands. Econet, with a market capitalisation of US$147 million, is the largest institutional investor in KMAL, while Old Mutual and the mobile telecommunication company have not been the best of friends since the EGM in March. Since 2007 Old Mutual has tried in vain to reverse the merger of Kingdom and Meikles.

The long-running battle between these two corporate giants also follows Econet’s decision to acquire, together with Renaissance, a controlling stake in FML, Old Mutual’s largest competitor in the life business.

Old Mutual also raised conflict of interest issues relating to chairman Tawanda Nyambirai’s role in the transaction. Nyambirai will step down at the next AGM.

With EWG and TSMI, who between them have more than 50%, unable to vote because of conflict of interest provisions, Old Mutual had hoped that its own shareholding of about 12%, and that of the other allied shareholders, would be enough to vote down the deal.

Delta, the most capitalised counter on the local bourse at US$485 million, is currently talking to Econet to swap its Ariston Holdings shares for the mobile operator’s shares in Mutare Bottling (Pvt) Company.

This comes after an Ariston management-led consortium reportedly failed to secure funding from local banks to acquire a 40% stake in the premier horticultural company.

Delta management is keen on getting rid of Ariston, a business it now considers a departure from its core beverage business, but cannot find a buyer for its cast away asset. Econet bought 63% of Mutare Bottling Company in 2007, through wholly owned Pentamed Investments.

Econet Wireless founder Strive Masiyiwa is said to have struck a voting pool agreement with KMAL chairman John Moxon which is likely to result in the termination of a two-year marriage between the Nigel Chanakira-founded Kingdom Financial Holdings Ltd (KFHL) and Meikles Africa Ltd that culminated in the formation of Kingdom Meikles Africa Ltd (KMAL) in November 2007.

The alliance between Masiyiwa and Moxon, although sources close to the two deny it, is widely seen as marking a turn in relations between the Econet boss and his long-time friend, Chanakira, who is not happy with plans to demerge Kingdom from the assets predominantly owned by the Meikles family. Econet last week requested for an extraordinary general meeting (EGM) at which shareholders will be asked to vote for a de-merger of the group.

At the EGM, Econet is expected to vote for the demerger along with a cluster of companies linked to the specified former KMAL chairman.

Under the proposed de-merger, KFHL will be spun out of KMAL, which will then revert back to being called Meikles. The shareholders of Meikles will own the same shareholding in KFHL as before. KFHL will then be re-listed on the Zimbabwe Stock Exchange.

Econet Wireless Zimbabwe chairman, Tawanda Nyambirai, has formally sent a requisition to the KMAL board to call the meeting within 21 days (two weeks now left).

If the resolutions are approved by the shareholders, Chanakira will go back to running KFHL, but Meikles is expected to appoint a new CEO. All the directors appointed by Kingdom to the KMAL board will be required to resign, and those appointed to Kingdom by Meikles will also have to resign.

The two companies will have exactly the same shareholders holding the same percentage shareholding in each company.

There will therefore be no prejudice to any shareholder currently holding KMAL shares.

KMAL  –– a 2007 merger between KFHL, Meikles Africa Limited, Tanganda Tea Company and the Cotton Printers  –– has been in the news for the wrong reasons altogether.

The group is at the centre of a boardroom fight between Moxon, whose investment vehicles control 43 percent of KMAL and Chanakira, backed by Africa First ReNaissance Corporation.

Moxon took the fight to the KMAL CEO when he tried to stage a palace coup through an EGM against Chanakira and two other directors in October last year. The EGM was later to be shelved after the High Court ruled it illegal.

Businessdigest has it on good authority that scores of foreign investors have been in the country since last week studying the stock market.

Some of the investors have bought shares from various counters which included, Econet, Old Mutual, Delta, Innscor Africa, KMAL and Art Corporation.

“Foreign investors are worried about the one call over session in Zimbabwe which makes it difficult for them to monitor movement of share, unlike in Europe or the America,” a stockbroker said yesterday.

After weeks of impressive gains, profit-takers visited the market during the second half of the week resulting in mixed trading on the market. Other analysts said local investors have been selling whilst foreigners have been buying.

“That is why the volumes keep on rising even on counters that traditionally do not trade large volumes,” said one analyst. This article was originally published in The Zimbabwe Independent