Many of our readers have been calling our paper asking what Nigel Chanakira’s loss of Kingdom Financial Holdings Limited (KFHL) means to the banking institution and its clients.
Others wanted to know whether the latest development really puts an end to John Moxon and Chanakira’s long drawn — out struggle for control of Kingdom. The answer to the first question is simple.
Chanakira’s bid was to regain an institution that he sold some time ago and his failure to buy it back has minimal impact on the banking group, save for a possible change in investor perceptions.
The decision on whether to bank with institution A, B or C is not purely random. It closely follows the dictates of one’s perceptions.
But whichever way one chooses to look at the ownership issue, business still goes on as usual.
The second question is, however, tricky.
We can’t really tell whether the ownership tussle that led to the decision to separate KFHL has run its full course. Technically, the decision by the Meikles board to reject Chanakira’s bid to buy back 42,9% of KFHL from its parent is not final yet.
The power to make such a decision lies not with the board but with the shareholders of Meikles Limited.
According to procedure, the Meikles board will have to convene an extraordinary general meeting (EGM) of shareholders and put its recommended decision to vote.
On paper, the board’s decision will pass with ease since the decision to keep Chanakira out was made by directors aligned to the disposer, Moxon, the single largest shareholder of Meikles Limited.
This means Moxon can simply use his voting interest to rubber-stamp the board’s decision at the EGM.
This means that KFHL will remain a subsidiary of Meikles Limited. Moxon, as the single largest shareholder, will be entitled to make two board appointments to KFHL and, most probably, eject Chanakira from his current position as chief executive officer.
That would be a double tragedy for Chanakira.
He will have no option but to try another game.
But a second scenario is also possible.
There is a chance that Chanakira can mobilise minority shareholders into a majority and veto the board’s decision.
If that happens, then we could see the embattled banker turning tables at the EGM.
In that case, Chanakira would gain the necessary reprieve to look for money and buy back his bank in terms of agreed demerger conditions.
That is, if he can sway minorities to his side, which is not obvious.
The issue should be viewed purely as a corporate transaction, not otherwise.
Many people were happy that Moxon and Chanakira had finally agreed a truce that seemed to work in everyone’s favour.
But the uncertainty created by the sudden turn of events is not good for the bank and its banking clients. It can alienate a significant proportion of KFHL’s business, including traditional clients.