ZSE blocks ASL, Dawn deal

HARARE - The Zimbabwe Stock Exchange (ZSE) has blocked African Sun Limited (ASL)'s proposed transaction to dispose its 16,54 percent stake in listed property firm, Dawn, over breach of listing rules.

Shingi Munyeza's ASL intends to offload its 406,466,976 Dawn shares to Lengrah Investments Private Limited, a subsidiary of private equity group Brainworks Capital (Brainworks), which is in turn a major shareholder in the former.

The hotelier has valued the Dawn stake at $5,6 million and awaited approval of the sale at annual general meeting to be held next month.

But, the bourse's chief executive Alban Chirume, argues that ASL was supposed to initially seek ZSE's approval before tabling it to its shareholders.

"...the ZSE censured African Sun Limited in writing...for contravening listing rules," he said.

He said in terms of Section 9 of the local bourse's listings rules, the proposed transaction is a Category 1 transaction which requires shareholders' approval.

"(ASL's) circular and notice thereon for the proposed transaction had not yet been approved by the ZSE for distribution to shareholders," Chirume said.

"To maintain the integrity of the market, the ZSE listings rules demand that all Category 1 transactions and notices by the issuers must be approved by the ZSE before publication," he said, adding the ZSE directed ASL retract the proposed transaction "until the approvals have been obtained".

ASL has retracted.

Under the proposed deal, ASL planned to dispose the shares at a cost not less than $0,0147 per share, being the price which the initial 12 percent of the issued capital of Dawn was disposed.

The group - managing a portfolio of nearly 20 hotels in and outside Zimbabwe - intends to channel proceeds towards reducing its short term debt.

Gearing is expected to go below 35 percent after the disposal of the Dawn stake.

ASL sold another 12 percent Dawn stake in October last year.

Meanwhile, analysts say ASL may delist after Brainworks increased its shareholding beyond the bourse's prescribed threshold.

Last year, Brainworks - through Lengrah Investments - increased its shareholding in ASL from 32 percent to 45 percent following a special bargain of 42,3 million shares.

However, according to ZSE's listing rules, an entity that acquires more than 35 percent of a listed company is required to buy out minority shareholders at the current trading price and subsequently delist from the bourse or reduce shareholding to prescribed level.

Market analysts believe that Brainworks Capital through its anchor shareholder, African  evelopment Corporation, intends to list either on the Frankfurt Stock Exchange or the Toronto Stock Exchange.

Munyeza, also a shareholder in Brainworks through his family investment vehicle Nhaka Trust, has said the private equity group targeted to increase its shareholding in the hotelier.

"We want to accumulate as many shares as possible. Our aim is to grow our value in African Sun," he said upon Brainworks increasing its stake last year.

He said a mandatory offer to minority shareholders is currently going through the approval process with the regulatory authorities.

In the half year to March 31, 2013, ASL's earnings before interest, tax, depreciation and amortisation (Ebitda) increased by 65 percent to $3,6 million from $2,2 million registered in prior comparable period, largely driven lower operating expenses which went down four percent.

Cash generation improved from $580 000 to $3,13 million though the improved performance was diluted by increase in finance charges.

This resulted in a slump in net profit to $1,23 million from $1,5 million realised in the prior comparable period.

Revenues marginally increased by 1,6 percent from $26,2 million to $26,6 million.

Comments (2)

The African Sun is set for sunset for sure.Delisting is one sure way of oblivision and perhaps that would be the last we will hear of this former blue chip hotel division of Delta Corporation.

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