Zimbabwe: Kingdom feud not over yet

Tawanda Karombo Harare – The long standing business feud between South Africa based businessman, John Moxon and Zimbabwean banker Nigel Chanakira – touted as one of the country’s first pioneers of black entrepreneurs – is far from over.

Chanakira, whose Kingdom Financial Holdings Limited (KFHL) merged with Moxon’s Meikles Africa Limited in December 2007, has been locked in a bitter battle to wrest control of the financial services concern from Meikles following a merger deal that has turned sour.

Upon their merger in 2007, the two companies incorporated Tanganda Tea Company and little known Cotton Printers, to form a blue chip company, Kingdom Meikles Africa. The merged entity had plans for a London offshore listing.

But barely two years later, serious differences over strategy and the vision for the merged entity emerged between Chanakira, who had assumed the chairman position of the merged entity and Moxon.

Initially, the feud cantered on Moxon’s plan to sell Cape Town based Cape Grace Hotel to Mentor Africa, which is alleged to have strong links to Moxon. Chanakira was opposed to this development, especially as it came on the eve of the 2010 Fifa World Cup hosted by South Africa this year.

What incensed Chanakira was the fact that Moxon allegedly waded into his responsibilities as he signed the agreement of sale to Stephen Levenberg’s Mentor Africa. As chairman of the merged entity which owned Cape Grace Hotel, Chanakira believed that this was his call to make.

These differences, in addition to reports that Moxon wanted to oust Chanakira and two other aligned non-executive directors and replace them with his family members and close associates, culminated in a decision to have the two entities break their association by way of a demerger.

It was then agreed at an extra-ordinary general meeting of the merged entity which was held on June 22 last year that the board members of Meikles Africa Limited “demerge KFHL from Meikles”.

Reports indicate that Mugabe at one point openly declared his support for Chanakira. Biti is on recorded saying he wanted a “win- win solution” to the “vicious and unkind corporate war” in a letter to Gono.

Last year, Chanakira and Moxon’s Meikles struck an agreement that would have seen Chanakira acquire the contentious 43 percent shareholding in his company which is held by Meikles. Chanakira was to pay US$15 million for the transfer of these shares but the renowned banker failed to raise this amount on numerous occasions, following which deadlines were extended but still, he could not pay up.

This development stalled the whole process of the demerger. Another issue that has been contentious between the two parties involves a US$22,5 million facility that was advanced to the central bank on  behalf of KFHL by Meikles in 2004. This amount was used for KFHL to meet adequate capital requirements for the banking concern.

The money was distributed and used as follows; Kingdom Bank Limited, US$12, 5 million; Discount Company of Zimbabwe, US$7, 5 million; and Kingdom Asset Management, US$2, 5 million.

KFHL says in its unaudited financial results for the half year ended June 30 2010 that: “On 11 June 2010, in pursuance of the condition precedent, Reserve Bank of Zimbabwe reversed cession of the US$22,5 million back to Meikles group..”. This, says Kingdom in the commentary accompanying the results, has created a “temporary capitalisation gap of US$11 million for Kingdom Bank Limited”.

While indications in recent weeks have suggested that the feud is now almost settled, Meikles board chairman Farai Rwodzi said in an abridged statement to shareholders that this is not so.

“To date, the demerger has not been implemented both due to issues Meikles faced at the end of 2009 and early 2010 and the non-fulfilment of all of the demerger’s conditions precedent,” said Rwodzi.

He however goes on to state that these issues are “largely resolved” and that the Meikles board “now proposes that the demerger takes place”.

The abridged statement to shareholders indicates that Meikles has now rescinded on its initial fee for the shares of US$15 million. Under the new deal thrashed by the two parties, Chanakira and Kingdom are now supposed to swop his shareholding in Meikles Africa Limited.

This effectively means that Chanakira will now have to pay US$6, 45 million for the 43 percent shareholding.

“Shareholder are advised that in the event that an offer acceptable to the board for the purchase of the Meikles shares in KFHL is received prior to the date of the EGM …. Shareholders can vote on the offer,” says Rwodzi.

The EGM stated above however represents a watershed development as Chanakira now has to pay the US$6, 45 million before the October 13 date of the EGM.

Rwodzi says the “implementation of the demerger transaction” is “conditional”. He sets out the conditions as; “KFHL meeting the requirements of both KFHL’s Memorandum and Articles of Association and the companies Act for the reduction of KFHL’s share capital by the amount of US$22,5 million”.

He also says that another condition is “the successful implementation of the aforementioned reduction of KFHL’s share capital so as to regularize the transfer from KFHL to Meikles of the KFHL debt’.

He goes on to say the demerger “shall be of no force or effect unless such conditions” are met.