Lack of agreement over valuation and control saw Powerspeed Electrical terminate its negotiations with Innscor Africa for a possible equity deal.
Subsequently the listed retailer yesterday announced that it was ending its three-month cautionary statement.
Market reports had said Innscor was eyeing a 49 percent stake in Powerspeed with a view of tying it up with another recent acquisition, Transerv. Sources said the transaction was supposed to be a combination of cash, debt retirement for equity plus convertible quasi-equity.
The broader plan was to create a specialised retail unit which would also include TV Sales & Home.
Innscor has already issued a cautionary on its intention to unbundle and create a specialised retail unit which will be listed separately on the Zimbabwe Stock Exchange.
However, the negotiations failed and Powerspeed announced yesterday that it had pursued other avenues where it restructured $2,5million of its short term debt into a two and half year redeemable debenture while well-placed sources said the group would seek to raise further funding.
Its borrowings are currently in the $6 million region. In the year to September, the group paid close to $800 000 in finance costs.
Managing director Hilton Macklin in a trading update at the company’s annual general meeting yesterday said the company will soon issue an end of cautionary notice to update the market.
“The negotiations for a transaction which we were involved in have been terminated, we hope to publish end of cautionary any time from now,” he said.
Sources said the main disagreements were on the valuation and control of the business. Under the proposed structure Mr Macklin and his team would have been swallowed up by Transerv which has a bigger turnover.
Market analysts told The Herald Business that there were a lot of factors at play which eventually led to the collapse of the deal but chief among them was how profitable Powerspeed is already as a standalone business.
Innscor’s share price has been on decline since the unbundling of Simbisa Holdings. Its last trading price is a low 18,95c.
Analysts are agreed that Innscor has now adopted predatory behaviour ever since it embarked on its restructuring under the leadership of CEO Toni Fourie; behaviour which is constantly putting to test Zimbabwe’s competition laws. Mr Fourie last year promised acquisitions as part of a three-year restructuring exercise.
“(Mr) Fourie is an acquisitions guy . . . if there is such a word. Remember when he was at Ellerines in South Africa he said: ‘When I was asked to run Ellerines, I thought why would I want to run a chain of unsexy, downmarket furniture shops, but then I realised I would have the opportunity to not only transform a company, but an entire industry . . .’ He is on the same mission to ‘transform’ industry,” said Miss Fiona Chigwida a market analyst.
Late last year, through its unit National Foods, the group failed in its bid to acquire a stake in Probrands’ dairy division Pangolin after they were accused of not offering satisfactory commercial terms.
At the same time the group managed to acquire a stake in Profeeds through Ashram (Pvt) Limited in spite of objections from the Competition and Tariff Commission.
Mr Fourie’s mobile phone rang unanswered at the time of going to print.