Zimpapers Logo

The fresh capital injection would help clear a catalogue of debts totalling $25 million and provide the much needed financial resources to recapitalise the group

Golden Sibanda Senior Business Reporter
PRIVATE equity firm, Takura Capital will inject a total of $33 million into Cairns Holdings by September this year to complete its takeover of the fast moving consumer goods manufacturer and give impetus to its recovery plan.

The fresh capital injection would help clear a catalogue of debts totalling $25 million and provide the much needed financial resources to recapitalise the group that is showing strong signs of sustainable profitability.

Takura Capital would invest $7 million into the business on signing of the agreement and another $7 million will be paid to recovery scheme participants, as Cairns now seems to be fast steering away from any danger of liquidation.

The local investor, which also controls the country’s oldest bakery Lobels, would immediately inject $2,7 million, which will later be augmented by another $4,5 million to get the business running at full capacity.

The group continues to make giant strides towards recovery after shareholders and creditors last Wednesday unanimously approved detailed framework for the group’s reconstruction scheme.

Mounting debts and challenges with regard to working capital had been weighing heavily on efforts towards sustainable turnaround of Cairns, but its limited production always raised hope that it could be turned around.

Judicial manager Mr Reggie Saruchera confirmed on Friday last week that Takura Capital had been selected as the preferred investor to acquire controlling interest in the Zimbabwe Stock Exchange-listed firm.

“Takura will invest $33 million. The deal will go through by September after approval of the scheme of arrangement by the High Court in August,” he said.

When the agreement is concluded, minority shareholders would receive $643 000 while the major shareholder, RBZ, will get preference shares worth $1 million while the balance of $271 000 would be paid within 12 months.

Further, Mr Saruchera said preference creditors will get 12 percent of their debt and the balance will be converted into a debenture payable in five years at 5 percent interest in the case of the Zimbabwe Revenue Authority.

Workers will get 20 percent down payment and the balance of $1,8 million will be paid within five years in terms of the approved scheme of reconstruction.

“The capital injection will be enough to cover all creditors and the balance will provide further capitalisation for the group,” Mr Saruchera said.

Mr Saruchera said that the $33 million fresh funding injection by Takura Capital would assist the group’s recapitalisation drive to increase capacity utilisation, enhance production efficiency and cut down on operating costs.

The company, which many suitors including Dairibord, Vasari Global of South Africa, Judah Holdings and Eastern Trading Company were angling for, is currently operating at average capacity utilisation of 40 percent.

This reflects the gradual increase in production that Cairns has registered from all time low capacity utilisation levels of 10 percent in 2010, but the recovery was kick-started with a $1 million loan obtained under the Distressed and Marginalised Areas Fund.

“The capital injection will increase production and our products will become readily available at sustainable and competitive prices,” he said.

The turnaround of Cairns will save several jobs at Cairns, which employs over 400 workers, the majority of whom were at one point sent home in efforts to reduce costs and save the company from potential collapse. Cairns Holdings’ range of products falls under four broad categories of chips and snacks, groceries, beverages and vegetable and fruit.

Despite its financial woes over the last five years, the company has managed to maintain brand equity and key skills it will now leverage on to recover.