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Fresh details on collapsed US$2,5bn CBZ bid emerge
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An ambitious plan by CBZ Holdings to create Zimbabwe's largest financial services powerhouse has collapsed after the Competition and Tariff Commission (CTC) imposed a series of restrictive conditions that the group ultimately deemed unacceptable, fresh documents have revealed.
The collapsed deal involved a multi-layered merger between CBZ Holdings, ZB Financial Holdings (ZBFH), First Mutual Holdings Limited (FMHL), and First Mutual Properties (FMP). If successful, the merger would have created a diversified financial services conglomerate with assets exceeding US$2.5 billion, radically reshaping the country's banking, insurance, and property sectors.
However, after years of negotiations and regulatory engagement, the deal was shelved earlier this year when CBZ Holdings pulled out, rejecting a raft of conditions laid out by the CTC, particularly around divestments, market conduct, and potential conflicts of interest.
At the core of the transaction was CBZ's strategy to gain a controlling 51% stake in ZBFH, starting with an initial 4.95% acquisition from Chappo Investments and Tracetory Investments. That move, under Zimbabwean law, would have triggered a mandatory offer to minority shareholders, in line with the Companies and Other Business Entities Act (COBE) and listing regulations.
But documents reviewed by the Zimbabwe Independent show the CTC flagged significant anti-competition risks that would have arisen from the proposed consolidation across key sectors - including banking, reinsurance, real estate, and healthcare.
In the insurance sector, the merger of First Mutual Re and ZB Re was considered problematic, as it would concentrate too much risk under one roof, limiting market options for other insurers. In the real estate sector, the merger would have placed two major players - Mashonaland Holdings and FMP - under the same sphere of influence via CBZHL and FBCHL, raising concerns of market manipulation or collusion.
"There is a need for a remedy to deal with the potential collusion," the CTC report reads.
The Commission further expressed concern that government clients, who reportedly direct payments such as passport fees to CBZ Bank, could further entrench CBZ's dominance in banking services, edging out competitors. The assessment noted that many stakeholders felt the merger would limit their access to differentiated products and pricing models offered by separate banks.
The CTC evaluated CBZ Holdings and FMHL as a single entity for competition analysis and flagged risks of collusion with FBCHL through shared ownership in Mashonaland Holdings. It also cited CBZ's recent shift of its medical aid portfolio from Cimas to First Mutual Health - a trend likely to be replicated with ZBFH post-merger - as indicative of anti-competitive behaviour.
Another major concern was the potential for "market foreclosure," where the merged entity would route profitable insurance and reinsurance portfolios internally, while offloading higher-risk clients to competitors. There was also unease about the use of FMHL's insurance funds to reinforce CBZ Bank's capital position, effectively closing off competition in the financial intermediation space.
The issue of corporate governance loomed large. The Commission noted potential conflicts of interest arising from the National Social Security Authority (NSSA) being a significant shareholder in all the major entities involved, while also appointing board members across CBZHL, FMHL, and other affected institutions. This raised fears of shared confidential information and compromised decision-making.
To address these risks, the Commission proposed stringent remedies: CBZHL and ZBFHL were required to maintain their separate banking brands; divest from Mashonaland Holdings, ZB Re, and Cell Insurance within 12 months; and seek prior approval before acquiring additional shares beyond the 4.95% threshold.
Furthermore, employment protections were put in place - barring merger-related job losses for 24 months except at senior management level, and excluding voluntary departures, early retirements, or performance-related terminations.
Perhaps most critically, the Commission ordered CBZ to relinquish the 1.9% additional stake it acquired in FMHL from Quant Africa Wealth Management - thereby limiting its holding to the previously approved 31.22%. It also barred any further board cross-appointments between CBZHL, FMHL, and NSSA.
For CBZ Holdings, the conditions proved a bridge too far.
The fallout from the failed merger underscores the complexities of financial consolidation in a market as small and tightly knit as Zimbabwe's. While CBZ's strategy aimed to leverage scale and synergies, regulators feared the result would be an unhealthy concentration of power and a weakening of market competitiveness.
Analysts say the collapse of the deal could prompt a re-evaluation of future consolidation efforts, pushing regulators, state investors, and financial institutions to balance the goals of capital formation with the imperatives of transparency, competition, and good governance.
Despite the setback, CBZ is expected to continue pursuing its growth agenda - albeit with a more cautious approach in future transactions.
The collapsed deal involved a multi-layered merger between CBZ Holdings, ZB Financial Holdings (ZBFH), First Mutual Holdings Limited (FMHL), and First Mutual Properties (FMP). If successful, the merger would have created a diversified financial services conglomerate with assets exceeding US$2.5 billion, radically reshaping the country's banking, insurance, and property sectors.
However, after years of negotiations and regulatory engagement, the deal was shelved earlier this year when CBZ Holdings pulled out, rejecting a raft of conditions laid out by the CTC, particularly around divestments, market conduct, and potential conflicts of interest.
At the core of the transaction was CBZ's strategy to gain a controlling 51% stake in ZBFH, starting with an initial 4.95% acquisition from Chappo Investments and Tracetory Investments. That move, under Zimbabwean law, would have triggered a mandatory offer to minority shareholders, in line with the Companies and Other Business Entities Act (COBE) and listing regulations.
But documents reviewed by the Zimbabwe Independent show the CTC flagged significant anti-competition risks that would have arisen from the proposed consolidation across key sectors - including banking, reinsurance, real estate, and healthcare.
In the insurance sector, the merger of First Mutual Re and ZB Re was considered problematic, as it would concentrate too much risk under one roof, limiting market options for other insurers. In the real estate sector, the merger would have placed two major players - Mashonaland Holdings and FMP - under the same sphere of influence via CBZHL and FBCHL, raising concerns of market manipulation or collusion.
"There is a need for a remedy to deal with the potential collusion," the CTC report reads.
The Commission further expressed concern that government clients, who reportedly direct payments such as passport fees to CBZ Bank, could further entrench CBZ's dominance in banking services, edging out competitors. The assessment noted that many stakeholders felt the merger would limit their access to differentiated products and pricing models offered by separate banks.
The CTC evaluated CBZ Holdings and FMHL as a single entity for competition analysis and flagged risks of collusion with FBCHL through shared ownership in Mashonaland Holdings. It also cited CBZ's recent shift of its medical aid portfolio from Cimas to First Mutual Health - a trend likely to be replicated with ZBFH post-merger - as indicative of anti-competitive behaviour.
The issue of corporate governance loomed large. The Commission noted potential conflicts of interest arising from the National Social Security Authority (NSSA) being a significant shareholder in all the major entities involved, while also appointing board members across CBZHL, FMHL, and other affected institutions. This raised fears of shared confidential information and compromised decision-making.
To address these risks, the Commission proposed stringent remedies: CBZHL and ZBFHL were required to maintain their separate banking brands; divest from Mashonaland Holdings, ZB Re, and Cell Insurance within 12 months; and seek prior approval before acquiring additional shares beyond the 4.95% threshold.
Furthermore, employment protections were put in place - barring merger-related job losses for 24 months except at senior management level, and excluding voluntary departures, early retirements, or performance-related terminations.
Perhaps most critically, the Commission ordered CBZ to relinquish the 1.9% additional stake it acquired in FMHL from Quant Africa Wealth Management - thereby limiting its holding to the previously approved 31.22%. It also barred any further board cross-appointments between CBZHL, FMHL, and NSSA.
For CBZ Holdings, the conditions proved a bridge too far.
The fallout from the failed merger underscores the complexities of financial consolidation in a market as small and tightly knit as Zimbabwe's. While CBZ's strategy aimed to leverage scale and synergies, regulators feared the result would be an unhealthy concentration of power and a weakening of market competitiveness.
Analysts say the collapse of the deal could prompt a re-evaluation of future consolidation efforts, pushing regulators, state investors, and financial institutions to balance the goals of capital formation with the imperatives of transparency, competition, and good governance.
Despite the setback, CBZ is expected to continue pursuing its growth agenda - albeit with a more cautious approach in future transactions.
Source - Zimbabwe Independent
