SA investor might acquire entire Cairns stake

CairnsBusiness Reporter—
Cairns Holdings prospective investor Vasari Global of South Africa might acquire the entire stake in the food and beverages maker. The investor would however, have to reduce his interest in the firm over an agreed period to comply with Zimbabwe’s indigenisation laws. Earlier, reports said the investor was targeting the Reserve Bank’s a 67 percent stake in the former Zimbabwe Stock Exchange-listed company.

The central bank is selling its stake in Cairns as part of programme to pull out of all non-core activities and raise funds to clear debts.
However, sources close to developments said yesterday that the company would first acquire the entire shareholding in Cairns Holdings.

After securing control of Cairns, Vasari Global would then reduce its stake in line with indigenisation laws, over a yet undisclosed period.
The investor has for a significant period of time been engaged in discussions with creditors, majority and minority shareholders of Cairns.
Government endorsed Vasari Global’s indigenisation plan, although specific details of the plan remained a closely guarded secret.

“There have been reports that the investor will buy only the Reserve Bank’s stake. In fact, the investor wants to buy 100 percent of Cairns.
“After acquiring all the shareholding in Cairns, Vasari would then start complying with the indigenisation requirements as agreed with Government.

“In the last notice, the judicial manager said that the regulatory approvals relating to indigenisation were now in place,” a source said.
Cairns was put under judicial management in 2012 due to serious financial problems that saw capacity utilisation dropping as low as 10 percent.
The firm is seeking an investor to inject capital to recapitalise operations. Vasari is therefore expected to inject more than $30 million.

Sources said the Government had been supportive and flexible regarding how the new investor should comply with indigenisation laws.
In terms of the Indigenisation and Economic Empowerment Act, foreign investors may not hold over 49 percent stake in local companies.
However, an investor may exceed the regulatory threshold allowed for foreign investors at the discretion of the responsible minister.

The indigenisation law was designed to bring previously marginalised black indigenous people into the mainstream economy activities.
Sources said that a scheme of arrangement, which is a court sanctioned meeting, to endorse agreement on the deal could be held soon.
The deal appeared to run into blind corners when the investor reported raised concerns about the amount he was expected to invest.

“The investor was obviously concerned about the state of the economy and the amount of money he was supposed to invest,” a source said.
“Vasari was concerned whether they would be able to recoup their money or make a return since the investor would inject more securing Cairns.”
In the discussions with creditors, Vasari proposed that some of them be paid from proceeds of the business, after the deal has been sealed. Alternatively, the creditors might get some shares in the company if the deal of Vasari fails to materialise.

Cairns has since made tremendous progress towards attaining viability and is now operating profitably, turning over about $2 million monthly.
Capacity utilisation now average between 35 and 40 percent, a huge growth from the all time capacity low of about 10 percent a few years back.
It has acquired new equipment and machinery for some divisions using internally generated funds. This adds to capital assets acquired using funds from the Distressed and Marginalised Areas Fund.

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