ABCH snubs ADC offer

HARARE - Africa-focused banking group ABC Holdings Limited (ABCH) has advised its shareholders to reject a mandatory offer by German-listed major shareholder, African Development Corporation (ADC).

ABCH — listed on the Botswana and Zimbabwe stock exchanges — said the recommendation followed financial advisory firm Imara Botswana Limited (Imara)’s requested opinion on the “fairness and reasonableness” of ADC’s offer.

“The substance of the opinion and views of the independent panel of the ABCH board are that the terms and conditions of the mandatory offer are fair, but not reasonable to ABCH shareholders,” the group said last Friday.

“Consequently, it is not recommended that ABCH shareholders accept the mandatory offer,” ABCH added.
It said detailed terms of the offer will be published this Wednesday.

This comes on the back of market observers contending that ADC would have to give its own shares on top of the cash to sweeten the offer.

After increasing its shareholding in ABCH beyond the prescribed 35 percent to 51,9 percent following a BWP357 million rights issue, ADC had to dispose of sufficient shares to reduce its shareholding or make a mandatory offer to minority shareholders to comply with the Botswana Stock Exchange’s listing requirements.

The Frankfurt Stock Exchange-quoted ADC offered minorities $0, 60 per share to ABCH shareholders registered on the Zimbabwe Stock Exchange and the exchange rate equivalent of BWP5, 05 for those on the Lusaka bourse.

Last June, ADC’s chief executive Dirk Harbecke told businesdaily that his group “wishes to retain its shareholding in ABC and is not prepared to sell down to below the 35 percent threshold.”

“…therefore the mandatory offer is a logical consequence and merely an administrative process to comply with stock market regulations,” he said.

In May, however, ADC’s stake was diluted to 47,1 percent after conversion of an International Finance Corporation (IFC) convertible loan to equity.

IFC acquired a 10 percent stake in the regional financial institution in a transaction under which ABCH allotted 24 080 230 ordinary shares to settle a $20 million loan, including accrued interest.

In 2007, IFC extended a seven-year loan to ABCH to finance the group’s ambitious expansion programmes and provide working capital for its banking units.

According to the convertible loan agreement, ABCH agreed to convert the debt into equity.

The group said IFC had decided to follow its option to convert the loan into ordinary shares with ABCH’s board approving the exercise.

ABCH said each new ordinary share will have the same rights as to distribution of profits and assets, and rank pari passu with each existing fully paid ordinary share in the company.

“Each new ordinary share and each existing ordinary share have the right to one vote per share,” it said.

Analysts say ABCH’s union with IFC will result in the pooling of expertise in areas such as risk management and advisory services.

Furthermore, the broadening of the shareholder base will afford ABCH access to credit lines and specialist training while enhancing its ability to undertake large projects.

The group’s BancABC banking subsidiaries operate in Botswana, Mozambique, Tanzania, Zambia and Zimbabwe.

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