African Development Corporation (ADC), a financial services group focusing on frontier markets of sub-Saharan Africa, has successfully negotiated an exit for its 11,5% shareholding in Ecobank Zimbabwe for $5,2 million.
The deal will be executed via a share swop. ADC swaps its shares in Ecobank for a 28% shareholding in Brainworks Capital Management (Brainworks), a local holding focusing on banking, insurance and the mining and fuel sectors.
Brainworks already hold shares in Ecobank Zimbabwe.
After acquiring shares from ADC, Brainworks will increase its total shareholding in Ecobank Zimbabwe to 36%.
As of September 30 2011, ADC had valued its shareholding in Ecobank Zimbabwe at €1,25 million ($1,6m), so this transaction results in a realised profit of €2,75 million ($3,5m) Commenting on the transaction, Dirk Harbecke, ADC’s chief executive officer, said: “Brainworks, as a local shareholder, is backed by the largest Zimbabwean pension funds, which makes Ecobank Zimbabwe compliant to indigenisation laws.”
“Furthermore, Brainworks grants ADC the possibility to broadly benefit in the future from the fast-growing market in Zimbabwe by simultaneously diversifying risks as Brainworks, besides banking, is also active in the insurance industry, agriculture and mining.
“We are very excited about the potential of the country and the potential of our intensified partnership with Brainworks.
We are sure Brainworks’ access to highly attractive deals will significantly contribute to ADC’s success in the future. The first joint transactions are already in preparation.”
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The transaction is effective from December 28 2011 and would be included in ADC’s full-year results 2011.
The transaction is ADC’s second successful exit — after a profitable cash-exit of Banque Rwandaise de Développement in 2009.
This also strengthens the corporation’s partnership with Brainworks and consolidates ADC’s presence in Zimbabwe, one of the most upcoming and promising countries in sub-Saharan Africa.
ADC entered the local market in December 2009 as one of the first international investors returning to the country by purchasing a 45% shareholding in Premier Bank Zimbabwe for around €3 million.
As part of restructuring effort, ADC, together with its local partner Brainworks, managed to subsequently bring in Ecobank Transnational Incorporated — one of the most successful pan-African banking groups — into Premier Bank Zimbabwe as majority shareholder.
By acquiring a 70% stake in September 2009, Ecobank brought in additional capital and commitment for additional funding.
After Ecobank Transnational Incorporated entry and subsequent capital increases, ADC shareholding was diluted from 45% to 11,5%.
