Shareholders of First Mutual Holding Limited (FMHL) yesterday gave the company the nod to acquire short-term insurer Nicoz Diamond Insurance Limited.
BY FIDELITY MHLANGA
The transaction requires approval from the Competition and Tariff Commission (CTC) and Insurance and Pension Commission (Ipec) with FMHL expecting to get the nod before year end.
Yesterday’s extra-ordinary general meeting of shareholders also approved the merger of Nicoz with the group’s insurance unit, Tristar Insurance Company Limited as well as a capital raising initiative to raise $17,25 million through a rights issue.
FMHL group chief executive officer, Douglas Hoto said the idea behind the rights issue was to raise resources to expunge legacy debts as well as increase capital to capitalise the new combined Nicoz Diamond and Tristar entities.
“The idea is that we need to strengthen the balance sheet and put more capital into new combined entities Nicoz and Tristar so that we increase underwriting capacity and deal with some legacy issues of the group, where the group was owing some money to the policy holders of the life company which should be paid back,” he said at the sidelines of the EGM.
Hoto was buoyant the acquisition would be approved by Ipec and the CTC before year-end.
“I think by the end of the year (what) we seek to achieve is approval by the insurance regulator which is Ipec and the Competition and Tariff Commission and also to put together a new structure to run the company. We think the transaction meet their standards,” he said.
According to the EGM circular, FML will acquire from National Social Security Authority up to 477 424 440 NDIL shares, representing up to 82,92% of the NDIL share capital at a consideration of 1 new FMHL ordinary share for every 5,02 Nicoz Diamond ordinary shares held by NSSA and to issue and allot up to 95 1004 470 new FMHL ordinary shares to NSSA.
FMHL is also authorised to make a mandatory offer to the remaining 19,08% Nicoz Diamond shareholders at terms and conditions acceptable to the directors in line with the prevailing market conditions.
Hoto did not rule out name changes in future, adding that staff rationalisation was inevitable when two companies merge.
FMHL chairman Oliver Mtasa said the first year would dwell on dealing with rationalisation of business to meet the expectation of the group.
“So we believe that yes in the first year there may be issues of rationalisation of business in order to streamline it to be in line with our expectations as First Mutual Holdings. Then afterwards we should be seeing significant contributions coming out of that acquisition,” he said.
Mtasa said focus would be on the integration of the acquisition into the FMHL group and realise maximum returns.
“The way forward is very simple. We now looking at the integration of this new acquisition into the FML group and try and realise the maximum return that we can. We believe it is going to give us positive synergies in terms of creating a much bigger group and optimising in terms of economies of scale,” he said.