ZIMBABWE Stock Exchange-listed financial services group FBC Holdings (FBCH), is seeking shareholder approval for a merger between its flagship unit and mortgage finance arm as the group seeks to meet the revised Reserve of Bank of Zimbabwe minimum capital requirements later this month, the company announced yesterday.
REPORT BY BERNARD MPOFU
Shareholders are expected to convene an extraordinary general meeting on June 27 this year, three days before banks comply with the staggered minimum capital requirement. The central bank last year raised minimum capital requirements for commercial banks to $100 million from $12,5 million. This June, banking institutions are expected to raise $50 million in capital. According to the company’s abridged circular to shareholders, plans are underway to merge FBC Bank and FBC Building Society (FBCBS) as part of the restructuring exercise.
“FBCH proposes to undertake the corporate restructuring transaction which will involve the merger of FBC Bank and FBCBS by way of transfer of undertaking of FBCBS to FBC Bank and the share swap. In order to give effect to this, the board further proposes to transfer NSSA’s shareholding in FBCBS to FBCH via the share swap of NSSA’s shareholding in FBCBS for shares in FBCH,” reads the circular in part.
“The merger will ensure that FBC Bank and FBCBS comply with the scheduled minimum capital requirements for June 2013, while the share swap will simplify the structure of FBCH by ensuring that all the subsidiaries are owned 100% by FBCH except for Turnall Holdings and Eagle Insurance Company (Private) Limited post the merger.”
The operations of the building society, according to the circular, would be divisionalised into a semi-autonomous business unit within FBC Bank through a transfer of the assets and liabilities of FBCBS to FBC Bank.
In terms of the share swap, NSSA is entitled to receive 80 099 800 FBC Holdings Limited ordinary shares with a nominal value of $0,00001 each, on the basis of 7,33 shares for every 100 FBC Building Society shares it has in FBC Building Society. The share swap represents 13,53% of FBCH’s issued share capital prior to the share swap and 11,92% of FBCH’s issued share capital after the swap, indicating dilution to other shareholders.
The swap ratio of 7,33 FBCH shares for every 100 FBCBS shares held by NSSA, the company said, was based on valuations conducted by FBC Bank (the financial advisors) and verified by an independent valuation expert.
The value of FBCH used for the share swap was determined by the market capitalisation of the group on the Zimbabwe Stock Exchange while FBCBS valuation was derived through a weighted average of four key valuation methods, namely—net asset value, discounted cash flow, excess return valuation and sustainable earnings.