The Competition and Tariff Commission (CTC) is expected to make a decision on the intention by financial services group, CBZ Holdings Limited, to acquire a significant stake in First Mutual Holdings Limited (FMHL), it has emerged.
The proposed acquisition of a 31.22% stake in FMHL was approved by CBZ shareholders at a recent extraordinary meeting and is part of the group’s diversification and consolidation strategy.
“CBZ Holdings Limited showed its intention to acquire First Mutual Holdings Limited and the case is going through necessary processes from the Commission with the final decision made shortly,” CTC said in its latest report released this week.
Well-placed sources at CTC told Business Times, a decision will be made before year-end.
The directors of the two companies-CBZ and First Mutual – have since advised shareholders of the potential acquisition, which could have an impact on securities prices.
The stake in First Mutual was held by the National Social Security Authority. If the transaction is approved by CTC, it will take CBZHL’s stake in FMHL to 34.44% as it already has a 3.23% shareholding.
Other potential mergers received by CTC were Sinomine (Hong Kong) Rare Metals Resources Co. Limited and Africa Minerals Limited & Amzim Minerals Limited, Tristar Transport LLC and Zuva Petroleum (Pvt) Ltd as well as Xerotech Proprietary Limited and Altron Document Solutions.
CTC also received merger notifications involving Annunaki Investments (Pvt) Ltd and Innscor Appliance Manufacturing T/A Capri (Capri).
It involves the acquisition of a 25% stake in Capri by Annunaki. Annunaki – the acquiring party, is an investment vehicle, wholly owned by SSCG Africa Holdings.
SSCG, Anunnaki’s parent company is an investment holding company incorporated in both Mauritius and Zimbabwe.
It has investments in the fast-moving consumer goods, tourism, human resources recruitment, agriculture, mining, packaging, financial services, equipment leasing, restaurants and clothing industries in Zimbabwe.
“The proposed transaction was classified as a conglomerate in nature. Conglomerate mergers in nature and by definition do not pose serious competition concerns.
“However, in this instance competition concerns were in the indirect market of fund management, as the merger had the effect of neutralising competition between two major competitors through indirectly uniting them.
“Two theories of harm associated with conglomerate mergers were applied and these are portfolio effects and deep pockets hypothesis. Portfolio effects assessed the possibility of SSCG in tying or bundling its already existing products with household refrigerators,” CTC said.
The Commission said given the nature of the products, the theory was dismissed as practicing tying and bundling was less likely to happen.
The acquisition of Capri by Annunaki, gives another deep-pocketed company, SSCG control over Capri, which would further enhance Capri’s financial position.
“With regards to concerns of the merging parties, the Commission viewed that the merger was not necessary since IAL was financially sound to meet the needs of Capri. IAL did not have any financial challenges which required support funding from SSCG.
“This transaction intended to unite two competitors, IAL and SSCG and since merger assessment is forward-looking, any anticipated competition concerns had to be dealt with before they had taken place,” CTC said.
The Commission analysed the transactions and recommended that the merger be prohibited. It further imposed a penalty on the merged entity amounting to ZWL$ 848,464.48 for consummating the merger without the approval of the Commission.
The merging parties were aggrieved by the commission’s decision to prohibit the merger and noted an appeal to the Administration Court.
It was during the court proceedings that the merging parties sought an out-of-court settlement to the matter.