Mr Vingirai Business Reporter
THE highly ambitious project to merge CBZ Holdings Ltd and ZB Financial Holding Ltd (ZBFHL), which was envisaged to create a financial behemoth capable of sponsoring and underwriting big-ticket national infrastructure projects, collapsed under the crushing weight of unresolved shareholding issues at ZBFHL that have been lingering for nearly a decade, The Sunday Mail Business can report.
The much-hyped deal, which was more than four years in the making and was now awaiting regulatory approval, fell through after Transnational Holdings Limited (THL) — which founded Intermarket Holdings Limited (IHL) and is currently the second-largest shareholder in ZBFHL — wrote to the Zimbabwe Stock Exchange (ZSE), the Competition and Tariff Commission (CTC) and the Securities and Exchange Commission of Zimbabwe (SECZ) in December warning that allowing the merger “without first resolving these material outstanding issues” could have been “patently illegal”.
The wrangles in ZBFHL stem from the outstanding 9 percent shareholding that is yet to be ceded to banker Mr Nicholas Vingirai’s THL, in line with a settlement agreement that was signed by parties on May 31, 2016 for Transnational to receive 33 percent ZB shareholding.
To date, only 24 percent of the 33 percent due to Transnational has been delivered.
The 2016 settlement agreement was the culmination of a probe by the Government’s special investigation committee, led by the then-Deputy Attorney-General, Mr Kumbirai Hodzi, into the activities of Intermarket and its founder for the period ending February 2004, which was characterised by the local banking crisis.
“The Intermarket Holdings business was lost when it was reconstituted by the central bank and then disposed in circumstances that we find highly irregular and therefore illegal to ZB Bank,” read a report from the Government special investigation committee, which was attached to THL’s letter (dated December 16, 2024) to the CTC, ZSE and SECZ.
“As is readily apparent from what is set out (in the report), the history of the handling of the Intermarket Holdings issue by the Reserve Bank and other State institutions is a litany of errors, mistakes and confusions commencing with administrative bungling on the part of the Reserve Bank officials and law-enforcement agencies . . . the enforced reconstruction of Intermarket Holdings Limited was wrong and grossly disproportionate,” added the committee.
Most damningly, the management at ZB at the time reportedly “did not have clean hands”.
“The position of ZB Holdings is totally different from that of a purely innocent commercial actor. ZB Holdings, from the very onset, did not have clean hands. Confidential communication from appropriate State agencies seems to suggest that ZB Holdings is not entirely uninvolved in some of the ‘elaborate skulduggery’ that the central bank refers to in its memo of the 1st of October of 2012,” said the report.
“The transfer and sale of Intermarket Holdings shares to the central bank and then to ZB Holdings is tainted with so much irregularity that it can and should not be allowed to stand.”
In 2012, former Reserve Bank of Zimbabwe (RBZ) Governor Dr Gideon Gono absolved Mr Vingirai and Intermarket of allegations of externalisation and breaching exchange-control regulations, which lay at the heart of challenges faced by the business in 2004.
Dr Gono claimed Mr Vingirai “was a victim of some elaborate skulduggery which is now a common feature against successful black businesspeople”.
The outcome of investigations prompted the Government to order an out-of-court settlement of the Intermarket-ZB dispute through a letter to the RBZ that was signed by then-Minister of Finance Patrick Chinamasa on March 6, 2015.
The letter confirmed the Government’s position and Cabinet’s directive on the matter.
Through the resultant settlement agreement, Transnational was entitled to 33 percent ZB shareholding, having board representation and assuming management of the group.
Years-long delays
However, nine years later, the agreement has not been fully consummated.
This is the reason Transnational, which also accuses ZB of trying to forcibly merge Intermarket Building Society and ZB Bank in order to boost the latter’s capital, exhorted the ZSE, CTC and SECZ to “respect the resolution of the Intermarket-ZB dispute as condition precedent to any such merger”.
“Since 2014, ZB has hatched multiple cunning devices to try and merge Intermarket Building Society and ZB Bank in order to boost ZB Bank’s capital. The latest such scheme was the September 2023 attempt to surrender the Building Society licence to RBZ so that the assets of Intermarket Building Society will by default become the assets of ZB Bank, thereby boosting ZB Bank’s balance sheet,” added the letter.
“However, the Reserve Bank of Zimbabwe, conscious of the unresolved Intermarket-ZB dispute, advised ZB against any such moves . . .”
What has further complicated the resolution of the shareholding dispute is the sale of NSSA’s shareholding to CBZ Holdings, which Transnational believes could have ordinarily been used to settle the outstanding 9 percent shareholding.
Transnational also claims the sale of NSSA’s shares was controversial as it had pre-emptive rights over the securities.
CBZ’s Beverly Building Society headache
Legacy issues surrounding Beverly Building Society (BBS)’s sale to CBZ by the RBZ, especially after its initial acquisition by Intermarket in 2002/2003 was deemed irregular by the central bank — which incidentally led to allegations of externalisation against Mr Vingirai and Intermarket — also further complicated the planned merger.
It was offshore payments estimated at US$2,7 million which were made by Intermarket to finalise the transaction that were conveniently used to raise allegations of externalisation.
It was, however, later discovered that the funds that were allegedly externalised and deposited into personal offshore accounts were in fact funds legitimately paid to Andrew Weir & Company in London for the acquisition of BBS by IHL in 2003.
Curiously, the transaction had also been duly approved by the RBZ.
Transnational, the parent company of IHL, also raises this matter with regulatory authorities.
“On the other side, CBZ continues to hold on to Beverly Building Society, an asset that belongs to Intermarket/Transnational. What we present herein are undisputed facts, fully known to ZB Financial Holdings Ltd, CBZ and RBZ,” the letter states.
“It would, therefore, be criminal corporate conduct on their part, to seek any kind of approvals from the regulators regarding any planned merger between them without full disclosure and resolution of such material issues. In any event, ZB and CBZ are approaching the authorities with unclean hands . . .”
Transnational also adds: “Both CBZ and ZB are public ‘quoted’ businesses, and banks for that matter, with an obligation to fully disclose matters of a material nature affecting their operations, for the sake of protecting the investing public. As a major shareholder of ZB Financial Holdings Ltd, Transnational is concerned about the information it has come across in the press regarding a contemplated merger between the two groups.
It would appear that ZB, and possibly CBZ, have not disclosed the weighty issues we highlight herein, despite their materiality and bearing on the contemplated transaction. If indeed they have not so disclosed, or have reported anything to the contrary to CTC and ZSE, that would constitute unconscionable corporate delinquency by listed entities.”
Fatigued by the inordinate delays and continued obstacles that continued to plague the transaction, CBZ decided against pursuing the deal.
In a later interview, CBZ Holdings chairperson Mr Luxon Zembe, who was incidentally ZB’s chairperson before switching to CBZ, indicated that the CTC insisted that ZBFHL had to divest from Mashonaland Holdings, Cell Insurance and ZB Reinsurance (incidentally all subsidiaries of Intermarket) for the transaction to be approved, which proved to be a deal-breaker.
The post The iceberg that sank proposed CBZ-ZB merger . . .ZB-Intermarket dispute comes to the fore . . .CBZ’s acquisition of Beverly also raised appeared first on Zimbabwe Situation.