corporate war" between Meikles Africa Ltd and Kingdom Financial Holdings Ltd
(KFHL), which has drawn into its vortex President Robert Mugabe and other
high-profile politicians.
The involvement of Mugabe, Biti and Reserve Bank governor Gideon Gono in the
intensifying battle for KFHL has left the corporate giant smouldering.
Mugabe has openly declared his support for the embattled KFHL founder Nigel
Chanakira and wants to resort to his controversial Indigenisation laws to
settle the dispute in the struggling banker's favour despite that the
companies in the dispute are already owned by Zimbabweans.
Biti says he wants a "win-win solution" in what he recently described in a
letter to Gono, which the Zimbabwe Independent has in its possession, as a
"vicious and unkind corporate war".
Gono recently said Biti and himself have had "enough of this nonsense" and
gave the two merged corporate entities an ultimatum to resolve the issue to
avoid further destabilising the fragile banking sector.
The fight between the companies has been affecting the banking sector, the
image of the country to investors, and the local securities market. New
proposals have now been put on the table to try to resolve the issue. The
two entities and their lawyers are currently discussing the latest
proposals.
In a bid to resolve the issue, Biti on August 26 wrote to Gono suggesting
ways of disentangling the convoluted corporate merger. KFHL merged with
Meikles Africa Ltd in 2008 to form Kingdom Meikles Africa Ltd (KMAL) amid a
blaze of publicity to create a financial concern which had ambitions of an
offshore listing. The new conglomerate included TM stores, Meikles Hotel,
Meikles stores, Tanganda, Cotton Printers and Kingdon Bank and its
subsidiaries.
In October last year, Chanakira entered into an agreement with Meikles
shareholders, including John Moxon, to acquire 43% of KFHL after the
de-merger. However, Chanakira failed to raise the required US$15 million.
Deadlines given for payment expired. Extensions were sought and granted.
Time limits provided in the extensions also expired, but Chanakira still
failed to raise the money, setting off fresh clashes in the protracted
struggle over the KMAL de-merged matrix.
Biti says in his letter to Gono that a "win-win solution" could be found
which would "achieve the objective of stabilising the market and quashing
the noise, enabling Chanakira to hold on to his bank and unlocking
shareholder value in both institutions".
"It is self-evident from the correspondence and report you have provided
that the relationship between the parties has irretrievably broken down with
no prospects of reconciliation," Biti wrote to Gono in his August 26 letter
titled Meikles Holdings versus Kingdom Bank.
"To put it mildly, the parties are locked in a vicious and unkind corporate
war. Under these circumstances it is my opinion that the demerger of the two
entities is the proper and logical solution," Biti said. "The net result of
this is that Kingdon Bank will be listed separately. I hope and trust that
for the sake of stabilisation of our country, this advice is upheld."
In his letter, Biti makes suggestions of the way forward on the issue which
has created a storm in political circles.
"The second issue relates to the settlement of the cross-shareholding by
shareholders in both institutions. The papers before me disclose the fact
that Chanakira has offered to buy out Meikles Holdings' interest in his bank
for the sum of US$15 million," Biti says.
"It also appears that BancABC are prepared to pay this amount. From the
discussion with yourself it appears that only an amount of US$7, 5 million
is available. Assuming BancABC has the full amount, then I advise that the
money be deposited in the creditor's bank account at Stanbic. I see no merit
in payment of this amount to the central bank".
A row had erupted over where the money from Chanakira to Moxon should be
kept, with Reserve Bank officials saying the funds must be kept at the
central bank, and Meikles executives demanding it must go to their account
at Stanbic. Biti says the money must be paid to the creditor's Stanbic
account.
Biti also says in his letter that he agreed with Gono that if Chanakira does
not have the US$15 million, then the shareholdings and shares in dispute
must be evaluated before a deal is done. However, Biti then says valuation
process would cause problems because "any evaluation, either professional or
otherwise, will always be subjective and in many situations fail to agree on
the persona of the evaluator".
Biti goes on to suggest that the evaluation should be left to the market if
the de-merger occurs and KFHL is re-listed on the Zimbabwe Stock Exchange.
"In short, let the market determine the values of the shares in both
entities," he says.
On the last contentious issue of US$22, 5 million which is theoretically
held by the Reserve Bank, Biti says it was a "technical issue touching on
capital reduction and other corporate issues".
The US$22,5 million sum was lodged with central bank by Meikles in 2004. The
funds were used to recapitalise Kingdom Bank's three subsidiaries to meet
the prescribed minimum capital requirements.
"My view of the matter is that this is not an issue that should stand in the
way of a settlement. Moreover as minister responsible for the administration
of the Companies Act, I would expect that the same is complied with, in
particular Section 92. I hope the above suggestions may help you guide the
parties to a win-win situation," Biti tells Gono in the letter.
Dumisani Muleya
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