The circus at CFI went a notch up during the week as the Messina camp went for broke announcing a counter offer to minorities at a price 2 times more than Starlap’s offer. From the statement accompanying the offer it is quite clear that the Messina camp will seek a reversal of the Langford Estate deal once they assume control of the entity. This is a deal which unlocked $18 million in value which in part was allocated to debt repayment and working capital at some of the distressed units. Nic Van Hoog who controls Messina believes the Langford asset was sold at a huge discount which may be a correct observation but he simply ignores the underlying factors on which the decision was based such as the distressed nature of the CFIs business, undercapitalization etc which would inspire a steep discount. If the published offer by Messina stands the deadlock in CFI is likely to prevail as the 2 majority shareholders hold a likely equivalent shareholding in the company in the region of 45%. It is also highly unlikely that Starlap will increase its offer price to near Messina levels due to complexities in organization of the vehicle.
There is likely to be increased caution on the part of NSSA although the Rudlands who controls ZHL and Baobab may be willing to go all the way. This may see a disbanding of the vehicle to allow the later to reciprocate. NSSA could possibly sell to the Rudlands but the later does not have the financial muscle to go it alone in terms of recapitalising the unit. In the same vein, although Messina may have the muscle to scale up a majority, Nic has no precedence in recapitalizing the companies he is invested in. It is worth noting that not a single company the British investor is invested in on the ZSE is on sound financial position nor on a stable profitability trajectory. His arguments in terms of corporate governance, sweating existing assets however remain valid. Elsewhere the strife at London listed ASA Resources, which controls Freda Rebecca and BNC, seems to be worsening and emerging details in the week showed that the company’s liquidity position has worsened and the business is technically insolvent. The company has since been suspended on the AIM board. ASA’s cashflow challenges are a result of weak mineral flows as well as externalisation of funds by the then management and these have dampened production.
In corporate updates OK Zim reported that first quarter revenue was 19% ahead budget and was ahead of last year. The growth in revenue far outpaced the growth in operating costs implying increased profitability. Improved local supply has seen stock turn rise to 8 weeks and likewise the company has been receiving 2 consignments of containers every fortnight funded by the Kawena program. The results shows a smooth transition at OK after Willard Zireva left the group earlier in the year. This is the first quarter under Siyarova’s stewardship and the company looks set to continue on a rebound. Elsewhere Delta announced that current engagements with regards to the termination of the bottler’s agreement are moving towards a common ground although noting that the discussions between various stakeholders on the buying out of AB InBev interests by TCCC were moving at a slow pace. BAT reported a stable topline performance while recording a huge bottomline growth driven by increased volumes of value brand as well as costs reconfigurations. Succession politics is at the fore of the ruling party with recent utterances by the first lady that Mugabe should anoint a successor, stunning observers as it is a first. She took a dig at an alleged faction which has become quite usual. In opposition, overtures to form a coalition ahead of the next election seems to largely be faltering as the main opposition comes short of charm although an alliance deal was reached with Tendai Biti’s PDP.
Gold jumped on Friday to breach Thursday’s 6-week Dollar highs above $1265 per ounce as the US currency fell yet again on the FX market following very mixed GDP data from the world’s largest economy. Annualized US growth in gross domestic product matched Wall Street forecasts, jumping to 2.6% between April and June from the first quarter’s 1.2% pace and led by a surge in consumer spending.
South Africa’s rand weakened on Friday, faltering in the face of technical barriers and political worries after an executive at the power utility Eskom was suspended pending an investigation into graft allegations. Sentiment towards the currency was also hurt by reports late on Thursday that the chief financial officer of state power firm Eskom, Anoj Singh, had been placed on special leave. Eskom said it was investigating claims Singh had granted preferential treatment to bidders supplying coal to the state-owned company.