News / Local
CBZ swoops on FML shares as new financial group emerges
13 Nov 2021 at 12:38hrs | Views
CBZ Holdings, currently trading under cautionary, has secured a 31.22% stake in First Mutual Holdings Limited (FML), paving the way for the creation of a US$2.5 billion financial behemoth to rival Old Mutual Zimbabwe, a leading diversified financial services group in the country for over 100 years, it has been confirmed.
"Further to the cautionary statements issued on 30 May 2021, 28 July, 1 September and 5 October, the directors of CBZ Holdings Limited wish to advise shareholders that, following conclusions of negotiations, the company has now executed an agreement for the acquisition of 31.22% shareholding in First Mutual Holdings from the National Social Security Authority (Nssa)," CBZ said in the latest cautionary.
"The agreement is subject to several conditions precedent, which if fulfilled and the transaction is successfully concluded, may have a material effect on the price of the company's securities."
As previously reported by The NewsHawks, the core of the project will involve merging leading financial institutions, including CBZ Holdings, ZB Financial Holdings, First Mutual Holdings Limited (FMHL) and First Mutual Properties (FMP).
The new institution - which will have a footprint on local and regional markets - will involve serious financial engineering and megabucks. It will have five major divisions: banking, insurance, investment, property and agriculture.
Investigations show that local tycoon Kudakwashe Tagwirei, who already has an interest across the merging financial institutions, together with a vast business portfolio which straddles mining, finance, agriculture, construction and other areas - making his Sotic International conglomerate one of the biggest in the country and region, will take a back seat in the deal as a politically exposed person buffeted by allegations of corruption and sanctions.
Documents obtained from banks involved in the project say the new financial services institution will thrive on economies of scale and fund large-scale public, national and private sector projects, while directly impacting on loan pricing and credit growth in the market. It will also have a major impact on the economic landscape, which is largely dominated and driven by big companies such as Old Mutual, Econet, Delta and Innscor.
Nssa disposed of the shares bought by CBZ, which were part of its 66.22% shareholding in FMHL. It retained 35% stock in the group, which is now expected to merge with CBZ under an ambitious plan to create the largest indigenously owned financial institution.
Nssa confirmed the disposal last week, but declined to reveal the identity of the buyer, saying the other party was still having "housekeeping issues to attend to".
However, two sources familiar with the transaction - a fund manager and a stockbroker - said CBZ had won the race for the shares ahead of six other bidders, after offering a premium to the prevailing share price and paying for a portion of the shares in foreign currency.
"The idea is to merge CBZ with FML to create a group that will match Old Mutual pound for pound. This has the blessings of government," a source said.
Old Mutual is the single largest privately-owned institutional investor on the Zimbabwe Stock Exchange (ZSE) and has a huge property portfolio across the country. It offers a wide range of products, including life assurance, asset management, unit trusts, property development and management, short-term insurance and banking services.
The NewsHawks reported in September plans by government to create the biggest financial services company in Zimbabwe, saying at the time that the project involved CBZ, FML and its property subsidiary and ZB Financial Holdings.
CBZ issued a cautionary statement earlier this year, indicating that it was considering the acquisition of an unidentified asset. That cautionary has not yet been lifted. The financial services company, the biggest banking group both in terms of deposits and balance sheet, is keen to grow its insurance portfolio and expand beyond the region, said the source. FML has operations in several countries in the region.
"It wants to compete with Old Mutual. In fact, it wants to create a financial services company with the biggest pensions company in the country. Already, CBZ Bank is bigger than Old Mutual's CABS, and Nicoz Diamond is bigger than Old Mutual's short-term insurance. Old Mutual remains unrivalled as the biggest life assurance and pensions company in the country, but the merger of CBZ's life assurance unit with that of FML will create a competitive pensions unit that can take Old Mutual head-on," the source indicated.
Nicoz Diamond is the country's biggest short-term insurer by balance sheet. It was acquired by FML a few years ago from Zimre Holdings. It then merged with FML's short-term insurer, Tristar Insurance.
CBZ Holdings and the other entity reported to be planned to come into the merger, ZB Financial Holdings, now have a common shareholding, which includes Nssa and Tagwirei.
Tagwirei last year purchased Nssa's 37.9% stake in ZB. Prior to that he was linked to the purchase of over 30% equity in CBZ. After the purchase, President Emmerson Mnangagwa went on to appoint Marc Holtzman, an American banker, as chairperson of CBZ.
Holtzman is close to Rwandan President Paul Kagame, now a Mnangagwa ally, and is also Bank of Kigali chairperson. Mnangagwa is trying to replicate Kagame's model in many ways. This has raised questions in the market on whether Mnangagwa has an interest in the group.
It was the first time a sitting Zimbabwean president had directly appointed a board chairperson to CBZ Holdings since government privatised the company in the late 1990s and became a minority shareholder. In fact, parastatal boards are appointed by line ministers, even though that should be sanctioned by the president.
Holtzman helped CBZ reduce its banking subsidiary's penalty from the United States Department of Treasury's Office of Foreign Assets Control for violating targeted sanctions on Zimbabwe.
The government has shares in CBZ and ZB Financial Holdings, still entangled in a protracted dispute on compensating former banker Nicholas Vingirai, who lost his controlling interest in Intermarket Financial Holdings Limited after the company was merged with ZB while he was under Reserve Bank of Zimbabwe specification in 2006.
While there are restitution agreements in place between the government, Vingirai and ZB, they have not yet been fully honoured. An earlier deal that gave him a sizeable chunk in ZB collapsed after haggling with other shareholders.
Although Old Mutual has been in Zimbabwe for over 100 years, it has in recent years been viewed suspiciously by the government, which once wrongly accused it of using its shares to manipulate the exchange rate in the country. This prompted a suspension of trading in Old Mutual shares, which are fungible and therefore trade on multiple bourses on which the company is listed.
The market had used the Old Mutual share price on the ZSE as an indicator of the implied exchange rate, infuriating the government, which then forced the shares to stop trading on the domestic bourse.
"Further to the cautionary statements issued on 30 May 2021, 28 July, 1 September and 5 October, the directors of CBZ Holdings Limited wish to advise shareholders that, following conclusions of negotiations, the company has now executed an agreement for the acquisition of 31.22% shareholding in First Mutual Holdings from the National Social Security Authority (Nssa)," CBZ said in the latest cautionary.
"The agreement is subject to several conditions precedent, which if fulfilled and the transaction is successfully concluded, may have a material effect on the price of the company's securities."
As previously reported by The NewsHawks, the core of the project will involve merging leading financial institutions, including CBZ Holdings, ZB Financial Holdings, First Mutual Holdings Limited (FMHL) and First Mutual Properties (FMP).
The new institution - which will have a footprint on local and regional markets - will involve serious financial engineering and megabucks. It will have five major divisions: banking, insurance, investment, property and agriculture.
Investigations show that local tycoon Kudakwashe Tagwirei, who already has an interest across the merging financial institutions, together with a vast business portfolio which straddles mining, finance, agriculture, construction and other areas - making his Sotic International conglomerate one of the biggest in the country and region, will take a back seat in the deal as a politically exposed person buffeted by allegations of corruption and sanctions.
Documents obtained from banks involved in the project say the new financial services institution will thrive on economies of scale and fund large-scale public, national and private sector projects, while directly impacting on loan pricing and credit growth in the market. It will also have a major impact on the economic landscape, which is largely dominated and driven by big companies such as Old Mutual, Econet, Delta and Innscor.
Nssa disposed of the shares bought by CBZ, which were part of its 66.22% shareholding in FMHL. It retained 35% stock in the group, which is now expected to merge with CBZ under an ambitious plan to create the largest indigenously owned financial institution.
Nssa confirmed the disposal last week, but declined to reveal the identity of the buyer, saying the other party was still having "housekeeping issues to attend to".
However, two sources familiar with the transaction - a fund manager and a stockbroker - said CBZ had won the race for the shares ahead of six other bidders, after offering a premium to the prevailing share price and paying for a portion of the shares in foreign currency.
"The idea is to merge CBZ with FML to create a group that will match Old Mutual pound for pound. This has the blessings of government," a source said.
Old Mutual is the single largest privately-owned institutional investor on the Zimbabwe Stock Exchange (ZSE) and has a huge property portfolio across the country. It offers a wide range of products, including life assurance, asset management, unit trusts, property development and management, short-term insurance and banking services.
CBZ issued a cautionary statement earlier this year, indicating that it was considering the acquisition of an unidentified asset. That cautionary has not yet been lifted. The financial services company, the biggest banking group both in terms of deposits and balance sheet, is keen to grow its insurance portfolio and expand beyond the region, said the source. FML has operations in several countries in the region.
"It wants to compete with Old Mutual. In fact, it wants to create a financial services company with the biggest pensions company in the country. Already, CBZ Bank is bigger than Old Mutual's CABS, and Nicoz Diamond is bigger than Old Mutual's short-term insurance. Old Mutual remains unrivalled as the biggest life assurance and pensions company in the country, but the merger of CBZ's life assurance unit with that of FML will create a competitive pensions unit that can take Old Mutual head-on," the source indicated.
Nicoz Diamond is the country's biggest short-term insurer by balance sheet. It was acquired by FML a few years ago from Zimre Holdings. It then merged with FML's short-term insurer, Tristar Insurance.
CBZ Holdings and the other entity reported to be planned to come into the merger, ZB Financial Holdings, now have a common shareholding, which includes Nssa and Tagwirei.
Tagwirei last year purchased Nssa's 37.9% stake in ZB. Prior to that he was linked to the purchase of over 30% equity in CBZ. After the purchase, President Emmerson Mnangagwa went on to appoint Marc Holtzman, an American banker, as chairperson of CBZ.
Holtzman is close to Rwandan President Paul Kagame, now a Mnangagwa ally, and is also Bank of Kigali chairperson. Mnangagwa is trying to replicate Kagame's model in many ways. This has raised questions in the market on whether Mnangagwa has an interest in the group.
It was the first time a sitting Zimbabwean president had directly appointed a board chairperson to CBZ Holdings since government privatised the company in the late 1990s and became a minority shareholder. In fact, parastatal boards are appointed by line ministers, even though that should be sanctioned by the president.
Holtzman helped CBZ reduce its banking subsidiary's penalty from the United States Department of Treasury's Office of Foreign Assets Control for violating targeted sanctions on Zimbabwe.
The government has shares in CBZ and ZB Financial Holdings, still entangled in a protracted dispute on compensating former banker Nicholas Vingirai, who lost his controlling interest in Intermarket Financial Holdings Limited after the company was merged with ZB while he was under Reserve Bank of Zimbabwe specification in 2006.
While there are restitution agreements in place between the government, Vingirai and ZB, they have not yet been fully honoured. An earlier deal that gave him a sizeable chunk in ZB collapsed after haggling with other shareholders.
Although Old Mutual has been in Zimbabwe for over 100 years, it has in recent years been viewed suspiciously by the government, which once wrongly accused it of using its shares to manipulate the exchange rate in the country. This prompted a suspension of trading in Old Mutual shares, which are fungible and therefore trade on multiple bourses on which the company is listed.
The market had used the Old Mutual share price on the ZSE as an indicator of the implied exchange rate, infuriating the government, which then forced the shares to stop trading on the domestic bourse.
Source - thenewshawks
