News / National
ZB and Vingirai split imminent
18 Jun 2017 at 05:03hrs | Views
THE split between ZB Financial Holdings (ZBFH) and Intermarket Holdings Limited (IHL) - which have been operating as a single entity for the past 11 years - seemed imminent last week after details emerged that their relationship had irretrievably broken down.
The Sunday Mail Business gathered that Government, through the Office of the President and Cabinet, and, most importantly, the Reserve Bank of Zimbabwe (RBZ) are expeditiously trying to bring closure to the long-standing issue.
Though Government managed to forge an agreement with THL last year through which the latter received a 19,9 percent stake in ZBFH, matters came to a head this year as the National Social Security Authority (NSSA) - a major shareholder in the group (37,8 percent) - resisted the proposed allocation of a further 6 percent to 10 percent to THL.
It also forced the removal of three THL nominees to the group and the appointment of all independent directors.
Restoration of THL rights in Intermarket and by extension ZBFH - through an agreement made on May 31, 2016 - was supposed to herald the appointment of nominees such as Mr Mike Mahachi, Mr Zororo Muranda and Mr Mike Manyika to the group, including the return of Mr Nicholas Vingirai as a non-executive director.
But NSSA blocked the appointments and also voted for a resolution to instruct THL to repay a US$658 699 dividend that it had received from ZB on January 23, 2017.
It is felt that such actions are a repudiation of the whole agreement struck between Government and THL. So, the current ZBFH board has NSSA nominees and management.
Since then, the deal has unraveled.
"Driving THL cattle out of ZB kraal"
THL has sought the indulgence of Government, which has however referred it to the Reserve Bank of Zimbabwe (RBZ).
It is understood that there has been correspondence between RBZ and THL as parties seek to come up with a definitive outcome.
By last week the central bank had held key meetings with stakeholders.
THL is understood to be pushing for a mutual separation of Intermarket and ZB as deep-seated mistrust has poisoned shareholder relations.
In a letter written by THL to RBZ seen by this paper, and dated June 9, 2017, the former claims that NSSA's action to vote against some of the undertakings made through the Government-sponsored agreement had made continued relations untenable.
"We do not know why NSSA would refuse to support a legitimate Government position but we can only speculate that it is a case of information asymmetry. Perhaps Government ought to share more information on the Intermarket/ZB dispute with NSSA for them to appreciate why Government decided to settle the matter out of court. . . "We have been treated with such indifference that we find it difficult to ignore."
"Crucially, THL indicated that it was not happy with some provisions of the Government-brokered agreement, but was prepared to overlook them out of "respect" for Government's efforts," THL said in the letter, which was also copied to the Ministry of Finance, the Ministry of Labour and Social Welfare and chief secretary to the President and Cabinet.
Most critically, THL notes that the rejection of the agreement by NSSA has afforded it the opportunity to "deal with this matter in a more traditional and conclusive way: that is "driving our cattle out of ZBFH's kraal".
Perhaps most significantly, the letter seeks RBZ's push through two key issues: the refund of the dividend "erroneously" owed to Government, and the return of Intermarket to THL.
The latest letter follows three similar correspondents with the central bank on March 20, March 24 and April 19 this year.
How can separation be possible?
There are however questions of whether the separation is even possible considering inter-party transactions and relations between the two entities under ZB.
However, THL maintains that with the help of an independent transaction advisor, the two constituent elements of the current group can walk different paths.
It is believed that the businesses are separately licenced and have different administrative structures, which can make the process both "straight forward" and "quick".
Vingirai's take
In a wide-ranging interview last week, Mr Vingirai refused discuss about the current negotiations despite being confronted by facts about the letter.
He however noted that THL had compromised to take up the current shareholding in the group - which it feels is relatively less than it is entitled to - simply out of respect of the efforts that Government had invested to sort out the messy affair.
He indicated that from the outset, THL has been questioning the "purported merger", which "inexplicably" gave away Intermarket to its rival - ZB.
According to the banker, the deal had been "surgically contrived" since the financial institution - in direct contravention of Banking Act - was the valuer, adviser and acquirer.
More especially, THL questions how the ZB board, which was pushing for the deal, could be the very same board that presides over the approval of the same.
"Our view is that the purported merger should be reversed because it offended the provisions of the Articles and Memos of IHL. In essence, ZBFH must hand back what it took illegally. An illegality cannot be cured can it? . .
"I am yet to understand how ZBFH came to control IHL well before the purported merger.
"More importantly, I want someone to explain to me in simple terms how ZBFH, being the "acquirer," was also the transaction financial adviser, and management of IHL. Yes, ZBFH prepared the management accounts of IHL, proceeded to prepare a valuation of IHL and then "acquired" it!
"The same Board which recommended to ZBFH that it was in its interest to acquire IHL turned around, sat as the IHL Board and recommended that it was in its interest to be acquired by ZBFH. You can see that the whole saga was surgically contrived," said Mr Vingirai.
THL believes it can be able to stand on its
own since it has a "significant asset base and clientele" made up of ZB Reinsurance, ZB Buildings Society, ZB Life, Mashonaland Holdings and Intermarket Banking Corporation.
On the other hand, ZB, with the support of cash-rich NSSA, has the institutional framework and support to clean its balance sheet and move on.
A key argument of Mr Vingirai is that before the 2006 scheme of arrangement, it was only Intermarket Discount House (IDH) whose liquidity position had been compromised and it was therefore improper to include the whole group under scheme.
He also says if that were to be the case, an independent transaction adviser ought to have been roped in for the scheme.
Most notably, Mr Vingirai notes that it is critical to separate him and IHL as two distinct legal personas whose cases had a different bearing to the fate of his business empire.
It is therefore his reasoning that since THL's shareholding in IHL remained uncontested, its entitlements such as dividends within the merged group must have been respected.
But this did not happen.
Mr Vingirai said: "IHL's financial statements show that IHL paid dividends but THL never received its share. Certain business lines conducted by IHL entities were collapsed into ZB Bank, for example, the discount house activities and private banking.
"This diversion of income from IHL to ZB Banking unduly prejudiced THL to this day. In addition to this, ZBFH overburdened IHL with arbitrary charges," added the banker."
THL said although it was keeping its options open, it was "infinitely better" to come to a mutual agreement.
RBZ on the case
Attempts to get a comment from RBZ Governor throughout the whole of last week were not possible.
However, Deputy Governor Dr Kupukile Mlambo indicated: "That one is handled in the Governor's office directly. I know he has been meeting them; this week (last week) he met them and couple more meetings, but I have no idea what is going on.
"That one we can't discuss it until they finalise."
ZBFH group chief executive officer Mr Ron Mutandagayi said he could not discuss shareholder issues.
"Those are shareholder issues. I dont even know that there are those sorts of talks. Even if I did, it's not in my place to comment on those issues. I am afraid I am not going to be helpful, I wish I could," he said.
Last week, NSSA chairman Mr Robin Vela intimated that the Authority will be amenable to any mutually-agreed outcome.
"I am aware that letters have been written to Government and to the Governor. We will look at the deal on its merits and we will say what is the value here of Intermarket versus shareholders? If it makes sense for us; we are not trying to be antagonistic, we also want to move forward. But we would want a deal that works for everybody. "
The Sunday Mail Business gathered that Government, through the Office of the President and Cabinet, and, most importantly, the Reserve Bank of Zimbabwe (RBZ) are expeditiously trying to bring closure to the long-standing issue.
Though Government managed to forge an agreement with THL last year through which the latter received a 19,9 percent stake in ZBFH, matters came to a head this year as the National Social Security Authority (NSSA) - a major shareholder in the group (37,8 percent) - resisted the proposed allocation of a further 6 percent to 10 percent to THL.
It also forced the removal of three THL nominees to the group and the appointment of all independent directors.
Restoration of THL rights in Intermarket and by extension ZBFH - through an agreement made on May 31, 2016 - was supposed to herald the appointment of nominees such as Mr Mike Mahachi, Mr Zororo Muranda and Mr Mike Manyika to the group, including the return of Mr Nicholas Vingirai as a non-executive director.
But NSSA blocked the appointments and also voted for a resolution to instruct THL to repay a US$658 699 dividend that it had received from ZB on January 23, 2017.
It is felt that such actions are a repudiation of the whole agreement struck between Government and THL. So, the current ZBFH board has NSSA nominees and management.
Since then, the deal has unraveled.
"Driving THL cattle out of ZB kraal"
THL has sought the indulgence of Government, which has however referred it to the Reserve Bank of Zimbabwe (RBZ).
It is understood that there has been correspondence between RBZ and THL as parties seek to come up with a definitive outcome.
By last week the central bank had held key meetings with stakeholders.
THL is understood to be pushing for a mutual separation of Intermarket and ZB as deep-seated mistrust has poisoned shareholder relations.
In a letter written by THL to RBZ seen by this paper, and dated June 9, 2017, the former claims that NSSA's action to vote against some of the undertakings made through the Government-sponsored agreement had made continued relations untenable.
"We do not know why NSSA would refuse to support a legitimate Government position but we can only speculate that it is a case of information asymmetry. Perhaps Government ought to share more information on the Intermarket/ZB dispute with NSSA for them to appreciate why Government decided to settle the matter out of court. . . "We have been treated with such indifference that we find it difficult to ignore."
"Crucially, THL indicated that it was not happy with some provisions of the Government-brokered agreement, but was prepared to overlook them out of "respect" for Government's efforts," THL said in the letter, which was also copied to the Ministry of Finance, the Ministry of Labour and Social Welfare and chief secretary to the President and Cabinet.
Most critically, THL notes that the rejection of the agreement by NSSA has afforded it the opportunity to "deal with this matter in a more traditional and conclusive way: that is "driving our cattle out of ZBFH's kraal".
Perhaps most significantly, the letter seeks RBZ's push through two key issues: the refund of the dividend "erroneously" owed to Government, and the return of Intermarket to THL.
The latest letter follows three similar correspondents with the central bank on March 20, March 24 and April 19 this year.
How can separation be possible?
There are however questions of whether the separation is even possible considering inter-party transactions and relations between the two entities under ZB.
However, THL maintains that with the help of an independent transaction advisor, the two constituent elements of the current group can walk different paths.
It is believed that the businesses are separately licenced and have different administrative structures, which can make the process both "straight forward" and "quick".
Vingirai's take
In a wide-ranging interview last week, Mr Vingirai refused discuss about the current negotiations despite being confronted by facts about the letter.
He however noted that THL had compromised to take up the current shareholding in the group - which it feels is relatively less than it is entitled to - simply out of respect of the efforts that Government had invested to sort out the messy affair.
He indicated that from the outset, THL has been questioning the "purported merger", which "inexplicably" gave away Intermarket to its rival - ZB.
According to the banker, the deal had been "surgically contrived" since the financial institution - in direct contravention of Banking Act - was the valuer, adviser and acquirer.
More especially, THL questions how the ZB board, which was pushing for the deal, could be the very same board that presides over the approval of the same.
"Our view is that the purported merger should be reversed because it offended the provisions of the Articles and Memos of IHL. In essence, ZBFH must hand back what it took illegally. An illegality cannot be cured can it? . .
"I am yet to understand how ZBFH came to control IHL well before the purported merger.
"More importantly, I want someone to explain to me in simple terms how ZBFH, being the "acquirer," was also the transaction financial adviser, and management of IHL. Yes, ZBFH prepared the management accounts of IHL, proceeded to prepare a valuation of IHL and then "acquired" it!
"The same Board which recommended to ZBFH that it was in its interest to acquire IHL turned around, sat as the IHL Board and recommended that it was in its interest to be acquired by ZBFH. You can see that the whole saga was surgically contrived," said Mr Vingirai.
THL believes it can be able to stand on its
own since it has a "significant asset base and clientele" made up of ZB Reinsurance, ZB Buildings Society, ZB Life, Mashonaland Holdings and Intermarket Banking Corporation.
On the other hand, ZB, with the support of cash-rich NSSA, has the institutional framework and support to clean its balance sheet and move on.
A key argument of Mr Vingirai is that before the 2006 scheme of arrangement, it was only Intermarket Discount House (IDH) whose liquidity position had been compromised and it was therefore improper to include the whole group under scheme.
He also says if that were to be the case, an independent transaction adviser ought to have been roped in for the scheme.
Most notably, Mr Vingirai notes that it is critical to separate him and IHL as two distinct legal personas whose cases had a different bearing to the fate of his business empire.
It is therefore his reasoning that since THL's shareholding in IHL remained uncontested, its entitlements such as dividends within the merged group must have been respected.
But this did not happen.
Mr Vingirai said: "IHL's financial statements show that IHL paid dividends but THL never received its share. Certain business lines conducted by IHL entities were collapsed into ZB Bank, for example, the discount house activities and private banking.
"This diversion of income from IHL to ZB Banking unduly prejudiced THL to this day. In addition to this, ZBFH overburdened IHL with arbitrary charges," added the banker."
THL said although it was keeping its options open, it was "infinitely better" to come to a mutual agreement.
RBZ on the case
Attempts to get a comment from RBZ Governor throughout the whole of last week were not possible.
However, Deputy Governor Dr Kupukile Mlambo indicated: "That one is handled in the Governor's office directly. I know he has been meeting them; this week (last week) he met them and couple more meetings, but I have no idea what is going on.
"That one we can't discuss it until they finalise."
ZBFH group chief executive officer Mr Ron Mutandagayi said he could not discuss shareholder issues.
"Those are shareholder issues. I dont even know that there are those sorts of talks. Even if I did, it's not in my place to comment on those issues. I am afraid I am not going to be helpful, I wish I could," he said.
Last week, NSSA chairman Mr Robin Vela intimated that the Authority will be amenable to any mutually-agreed outcome.
"I am aware that letters have been written to Government and to the Governor. We will look at the deal on its merits and we will say what is the value here of Intermarket versus shareholders? If it makes sense for us; we are not trying to be antagonistic, we also want to move forward. But we would want a deal that works for everybody. "
Source - zimpapers
