Bright Madera Corporate News
IMARA Zimbabwe recently predicted a flurry of corporate restructuring in the country and foreign investors took a very keen interest in this development. Due to lack of funding in the economy, foreign investors with deep pockets need to start
It seems Imara was spot-on given various developments in the market. There are also indications that there would be a few listings on the Zimbabwe Stock
Exchange this year although the one coming up soon is a reverse listing.
It appears we are going to wait a bit longer for an Initial Public Offering on the ZSE, simply because there is no money on the market.
There were high expectations that some foreign companies, mainly mining firms, would list on the bourse as a way of meeting the country indigenisation laws but it is increasingly looking like just one or two will do that.
Cambria Africa, formerly LonZim, will have its secondary listing on ZSE next month — through a reverse listing of Celsys Limited.
It is seeking to buy out the minority shareholders in Celsys to enable it to become its subsidiary.
Cambria, which currently controls 60 percent of Celsys, has proposed a Scheme of Arrangement with minority shareholders to receive shares in Cambria in return for the shares presently held by them in Celsys or alternatively will receive payment in cash.
Minorities who are going to opt for shares will get one Cambria share for every 686 Celsys shares.
Celsys is worth US$1 million and the company has got 1 599 645 849 shares in issue.
Those who do not wish to exchange Celsys shares for Cambria shares have the option of their shares in cash and the shares would be purchased at US0,03c for every Celsys share.
However, in terms of existing legislation, shareholders who go for cash option will have 1 percent of proceeds withheld as capital gains tax.
In this deal it was interesting to note that directors of Cambria did not want to prejudice the minority shareholders and the deal will result in the minority realising their investment even if they pull out of the group.
The directors of Celsys are of the opinion that the company requires a significant capital injection in excess of US$5 million in the medium to long term.
The funding is required for Celsys to continue with its expansion plans as well as to consolidate its market position and thereby earn commensurate returns for shareholders.
Initial expansion plans were primarily funded by Cambria through a shareholder loan of approximately US$4,5 million which remains payable to date.
Cambria said given the local capital market conditions and historical trends, it is of the view that any equity-based funding will result in the unfair dilution of the minority shareholders.
I think these are some of the issues regulators need to scrutinise in some deals because minorities will be diluted and fail to realise their investment, they need to be protected.
In addition, minority shareholders may not want to have additional exposure and risks associated with any debt funding structure.
Similarly for minority shareholders, Cambria is not prepared to accept the increased risks associated with providing meaningful additional debt to the company in its current ownership form.
Accordingly, to reduce the potential dilution of minorities and the risks associated with current and future debt structure, Cambria proposed a Scheme of Arrangement.
The scheme is expected to allow the minorities to realise the value of their Celsys investment by becoming part of an enlarged diversified company, reduce their debt associated risks in Celsys and enjoy attendant benefits.
Given the current environment in the country, minority shareholders would be on the receiving side, as they also don’t have the capacity to follow their rights in the case of a fund raising initiative.
And if companies go for equity based funding minorities would be wiped out from the company’s shareholding structures.
Email: firstname.lastname@example.org or email@example.com