CBZ has completed the acquisition of 31% of First Mutual Holdings Limited, giving Zimbabwe’s biggest bank a foothold in one of the country’s largest insurance and property firms.
In a stock exchange filing on Thursday, CBZ said it had reached an agreement with the National Social Security Authority (NSSA) for the First Mutual stock.
“Further to the cautionary statements issued on 30 May 2021, 28 July, 1 September and 5 October, the directors of CBZ Holdings Limited wish to advise shareholders that, following conclusions of negotiations, the company has now executed an agreement for the acquisition of 31.22% shareholding in First Mutual Holdings from the National Social Security Authority (NSSA),” CBZ said.
“The agreement is subject to several conditions precedent which if fulfilled and the transaction is successfully concluded, may have material effect on the price of the company’s securities.”
With the sale, NSSA now reduces its FML share from 66.22%, but remains the single largest shareholder.
Ahead of the sale, NSSA general manager Arthur Manase had said that a purchase price for the FML stake would be a mix of stock and hard currency.
“The hard cash will be allocated to impact investments and value preservation assets with a currency hedge, which will help stimulate economic activity, generate foreign currency, and create jobs for the benefit of all Zimbabweans,” Manase told the Zimbabwe Independent.
More control for CBZ
The sale is part of CBZ’s ambitions to extend its influence in the financial services market, which it already dominates.
CBZ is the country’s biggest bank by assets. It is also the biggest lender. CBZ accounts for 31% of all bank loans in the country, according to RBZ data.
The bank is reported to be considering the takeover of smaller bank ZB Bank. If that happens, it would be a further consolidation at the top of the banking food chain; as at December last year, the top five banks made up 66% of all assets and 75.5% of lending.
CBZ is the biggest agriculture lender in the country, through its arm CBZ Agro Yield. The unit was established in 2019 as the government sought to replace Command Agriculture with a new bank-led funding model. About 56% of CBZ’s lending goes into farming.
The latest transaction gives CBZ access to First Mutual’s insurance business, which includes short-term insurer NicozDiamond and reinsurance arms. First Mutual’s insurance business made revenues of US$24 million in the half-year to June. First Mutual also has a vast property portfolio.
The First Mutual deal is CBZ’s biggest acquisition of another financial institution since it bought Beverley Building Society in 2007.
CBZ has said it is considering a listing on the USD-based Victoria Falls Stock Exchange. Chairman Marc Holtzman told Bloomberg in May that “we still have a huge appetite for the local market”, and that the company was considering regional expansion.
Why is NSSA selling?
NSSA, which values its total investments at US$1 billion, has put some of its investments on sale, hoping to reinvest part of the earnings in forex-earning investments and to meet regulatory requirements.
The pension fund announced the First Mutual sale in January. It also announced that it was selling its stakes in Turnall. The 66.22% NSSA that held in First Mutual, which it has held since 2012, violated regulations of both the stock exchange and those of insurance regulator IPEC.
“This strategic move will see NSSA keep a majority stake at 35% in compliance with ZSE and IPEC requirements, while bringing in a strategic investor with solid financial resources,” NSSA said in a statement in January.
There was a total of seven bidders for the FML stake, according to Manase.
He said last week: “The successful bid was evaluated from a technical and strategic fit, followed by a financial evaluation.”
NSSA is also selling its wholly-owned NBS, five years after the formation of the building society.
The selloff has not been without controversy. Unions, who sit on the NSSA board, complained earlier this year that NSSA intended to sell stock to businessman Kuda Tagwirei, who reportedly has a 29% stake in CBZ held through a nominee account.
NSSA last year sold its 37.79% stake in ZB Financial Holdings in exchange for an additional 2.15% in CBZ. This increased NSSA’s shareholding in the bank to 18.17%.
What about FML?
FML has been restructuring its businesses.
In 2020, it shunted its reinsurance units into First Mutual Reinsurance. It then sold 29.1% in that company to Aleyo, a Botswana-based fund, for the US equivalent of US$5.3 million.
Source: Newzwire
