PG Industries Zimbabwe (PGIZ) Limited shareholders are next month expected to vote for or against the planned disposal of the group’s assets as the Zimbabwe Stock Exchange-listed industrial concern seeks funds to boost its working capital and reduce its short debt.
Report by Bernard Mpofu
PGIZ yesterday issued a circular announcing a forthcoming extraordinary general meeting where shareholders are expected to approve the disposal of the 27,9% equity in Manica Boards & Doors (MBD) and the sale of properties that are in excess of group operational requirements.
“It is proposed to dispose properties with a book value of $5,150 million and to dispose of the investment in MBD with a book value of approximately $3 million,” reads the circular in part.
“The disposal of the MBD stake will also result in the realisation of a loan investment.”
MBD was recapitalised in February this year and the exercise resulted in PGIZ reducing its shareholding ration to 27,9% from 60%.
The companies said the interest cost on the short-term loans, ranging between 18% and 22% would continue to be a burden should shareholders vote against the disposal of assets.
“After further careful consideration, the board has come to the conclusion that the investment in MBD is not strategic and is therefore proposing disposing of the stake to recapitalise other group companies.
“An additional motivation for the disposal of the MBD stake at this stage is that, due to the need to conserve cash for working capital needs, it is anticipated that MBD will not be in a position to declare a dividend, which would directly benefit PGIZ cashflows, until four to five years post recapitalisation.”
According to the circular, the shareholder agreement between the investors in Manica Boards & Doors who are PG Industries, Old Mutual Zimbabwe (OM) through their subsidiaries OM Life Assurance Company, OM Investment Group and PG Bison Africa Limited requires that when any of the investors decides to invest, it shall offer its stake to the remaining shareholders first before offering to third parties.
This, the circular further stated means that PGIZ’s residual shareholding in MBD will be offered to both OM and PG Bison Africa Limited.