LIVINGSTONE MARUFU
Seed manufacturing giant, Seed Co International Limited, has abandoned moves to force government rescind an earlier decision which scuppered the company’s merger with Seed Co Limited, it has emerged.
In June, the Reserve Bank of Zimbabwe (RBZ) blocked the planned merger saying it would not accept the externalisation of the company (Seed Co Limited) which started locally.
It is understood that Seed Co International has been pushing in recent weeks to have the merger deal back on track, engaging the RBZ in backdoor negotiations.
But, the government rejected the move.
Well-placed sources told Business Times that Seed Co International has abandoned the fight back bid.
“The company had hope that the engagements with the RBZ would change things around but the government didn’t have any of that as it rejected the externalisation of the company to a foreign nation,” a source said.
Seed Co Limited Zimbabwe has since re-listed on the Zimbabwe Stock Exchange (ZSE) while Seed Co International has maintained its listing on the Victoria Falls Stock Exchange.
Contacted for comment, Seed Co company secretary,Terrence Chimanya, referred Business Times to the group CEO Morgan Nzwere.
However, all efforts to get a comment from Nzwere were futile as his mobile number went unanswered.
Speaking at a recent analyst briefing, Nzwere, said the government was not happy with the externalisation of the company as it has roots in Zimbabwe.
“The reason that the authorities cited was that the international businesses were formed out of the country and therefore out of Zimbabwean assets.
“The authorities didn’t think that the Zimbabwe business should come under the international business. The RBZ was basically saying, look, it [Seed Co Limited ] is a national asset and we don’t think they should be bundled into Seed Co International,” Nzwere said.
According to Seed Co, the merger was to have a unified balance sheet where two businesses would be attractive to get funding in capital markets.
The RBZ wanted Seed Co to fulfil conditions precedence, including having independent valuations of both Seed Co International and Seed Co Zimbabwe, the consent of the shareholders of both firms, as well as the approval of the ZSE, the Botswana Stock Exchange and Securities and Exchange Commission of Zimbabwe.
Nzwere said the international capital markets were going to help the Zimbabwean market to raise US dollars on the back of volatile environment.
He said consolidating Seed Co International and Seed Co Limited into one company would have allowed them to be more attractive in seeking hard currency due to the country risk associated with Zimbabwe.
The move was also meant to harmonise in managing the group, ensuring that one board in terms of corporate governance and ensuring that the company does not have duplicated costs and cut costs for both entities.
The group’s much improved cash generation resulted in a reduction in borrowings and associated finance costs.
Associate and joint venture’ contribution remained negative mainly attributable to product shortages.
Nzwere said Seed Co International would continue to look for opportunities in countries where it is most profitable.
Besides Zimbabwe, Seed Co International has operations in Botswana, Ghana, Kenya, Malawi, Nigeria, Rwanda, South Africa, Tanzania, and Zambia.
In its financial results for the 12 months to March 31, Seed Co International reported a 26.2% increase in revenue to US$88.5m from US$70.1m achieved in the prior year.
The group also recorded a 24.7% growth in maize seed sale volume at 38 300 tonnes compared to 30 700 tonnes in the prior year.
Profit for Seed Co International rose 82% to US$11.1m in the reviewed period from US$6.1m reported in the previous year, due to the high demand of the seed during the just ended summer cropping season.
Total assets stood at US$137.2m during the period under review from US$127.7m during the prior year.