Kingdom, Meikles head for divorce in Zimbabwe's biggest de-merger

HARARE – THE 16-month-old marriage between Kingdom Financial Holdings Limited and the Meikles Africa Group, touted as the biggest merger in the country in years, appears to be finally heading for a divorce, to be finalised within the next three weeks.\r\n

Econet Wireless, which has been playing arbitrator in the battle between feuding directors Messrs Nigel Chanakira and John Moxon has requisitioned the KMAL directors to convene an extraordinary general meeting that has been set for June 22 to consider its proposal for the de-merger of KMAL.

According to the Econet proposal, the decision to de-merge should be a mere formality as shareholders holding more than 51 percent of KMAL shares have already indicated their support for the transaction.

This essentially means the majority of investors, including the feuding parties, have already assented to the divorce.

If the de-merger goes through it would be the biggest de-merger witnessed in the country since OK Zimbabwe de-merged from Delta in September 2001.

Econet believes the de-merger of the Kingdom Meikles Africa Group and the re-listing of Kingdom Financial Holdings Limited is the only way of resolving shareholder dispute.

The mobile service provider also hopes that the de-merger would enhance market perception of both Meikles Limited and KFHL.

Econet is proposing a simple divorce where current shareholders of KMAL would retain the same shareholding in the de-merged entities.

For instance, Econet, which has 10,56 percent shareholding in KMAL, would have the same shareholding in both the de-merged KFHL group and the Meikles Group.

Econet is also proposing that Kingdom and Meikles directors currently sitting on the KMAL board resign.

There would also be some changes in management structure in order to align them to the new challenges resulting from the de-merger.

"However, these anticipated changes will evolve and be implemented as an ongoing process of restructuring in line with the new group’s focus," read part of the proposal.

The divorce would also see the two entities retaining their assets and employees contracted to them prior to the merger with the exception that the Reserve Bank debt incurred by KMAL that was transferred to Kingdom Bank would be redirected to KMAL.

The KMAL shareholders are expected to vote on three ordinary and one special resolution.

The resolutions include the disposal of 234 046 621 KFHL issued shares to KFHL for cancellation.

"That the Directors of the Company be and are hereby authorised to transfer to KFHL at nominal value for cancellation 234 046 621 Kingdom Financial Holdings Limited ordinary shares," reads the proposal.

In addition shareholders would be required to approve the distribution of KFHL 245 374 791 issued shares to all KFHL shareholders by way of a dividend in specie.

The 245 374 791 issued shares constitute the remainder after the proposed transfer of 234 046 621 KFHL shares to KFHL for cancellation using a distribution of one KFHL share for every one KMAL shares held.

In addition, they would be required to approve the listing of Kingdom on the Zimbabwe Stock Exchange by way of an introduction and a special resolution of the change of name from KMAL to Meikles Limited.

Market watchers believe this creates a scenario where there are two entities that are not linked at management level, despite having the same shareholding structure.

"The real fun and games would start after the re-listing of Kingdom on the local bourse," said one of the market watchers.

"It would be interesting to see what Moxon and Chanakira would do with their shareholding in either Meikles or Kingdom.

"I do not believe that either would just dump their stock on the open market. So, there would be some negotiating to be done and most possibly some share swop."

The marriage between Kingdom and Meikles hit a bad patch last year after Mr Chanakira blew the whistle on Mr Moxon, accusing him of externalising foreign currency.

The allegations were later detailed in the BCA report dated October 20 2008.

Mr Moxon then retaliated by calling an EGM to oust Mr Chanakira and two other directors last October, but the EGM failed after it was ruled as illegal by the High Court.