Harare – The proposed merger of SeedCo International Limited (SCIL) and the Zimbabwe Unit, SeedCo Limited (SCL), is all but dead as the Companies could not secure a major regulatory condition precedent to conclude the transaction from the Reserve Bank of Zimbabwe Exchange Control division.
SCL had delisted from the Zimbabwe Stock Exchange (ZSE) in anticipation that the deal would be a success and was planning to list on the Victoria Falls Stock Exchange (VFEX) under SCIL, which holds status as the first company to list on the US Dollar denominated bourse.
This comes after SeedCo International Limited consolidated control in SCL through acquiring an additional 35% stake in the company early this year in line with new plans to buy back all shares listed on the ZSE. This took SCIL’s stake in SCL to 95%.
However, since the regulatory authorities have pulled the plug on the transaction – for reasons open to public debate, SeedCo Limited will resume trading its shares on the official main board of the ZSE with effect from Monday 21 June 2021.
The Companies made an appeal but without success.
“An appeal against the decision was made on 7 April 2021 and the External Loans and Exchange Control Review Committee upheld the decline decision on 8 June 2021,” the Companies said in a shared statement.
“Pursuant to this adverse regulatory decision, SCIL and SCL have no option but to abandon the contemplated consolidation transaction and revert to status quo.
“Going forward SCIL and SCL will continue to operate as two separately listed companies that are related in so many ways and will utilise a Group Shared Service Unit to harness synergies to the extent possible and permissible by laws, regulations, and best corporate governance practices,” they added.
Meanwhile, the Reserve Bank of Zimbabwe (RBZ) announced the blocking of SeedCo International’s acquisition citing a loss of a key company in the country.
Could this be bad precedence to the country’s efforts to attract foreign direct investment (FDI)?
One could certainly think so. It is like the authorities are dictating where foreign investors should put their money on and how much. Agriculture along with mining and tourism are Zimbabwe’s leading foreign currency generating industries and are reasonably the magnet to FDI. However, the protectionist stance taken by the authorities will most likely deter much needed investments.
What did the Companies stood to benefit from the acquisition?
From SCIL’s perspective, transferring only one of the entities, SCIL, to the Victoria Falls Stock Exchange while leaving SCL on the ZSE trading in ZW$ will not protect value for shareholders.
SCIL envisioned that the integration of the Zimbabwe operations will make its profile on the VFEX comparable to its dual-listed counterparts whose makeup comprises both international and Zimbabwean operations.
Seed Co Limited is the leading producer and marketer of certified crop seeds in Zimbabwe, supplying hybrid maize seed to commercial farmers as well as wheat, soya bean, barley, sorghum, and groundnut seed.
The seed Group had engaged the Exchange control authorities in August last year requesting the independent valuations of both SCL and SCIL, the consent of the ZSE, the Botswana Stock Exchange and the securities and exchange commission of Zimbabwe and the consent of the shareholders of both the SCIL and SCL.
However, their request was denied hence leading to the above-mentioned conclusion.
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