OM to acquire 12pc PG stake

HARARE - Old Mutual Assurance Zimbabwe Limited (OM) is set to acquire another 11,7 percent stake in hard-pressed building materials manufacturer, PG Industries (PG), after a bailout deal.

The insurance group will get one billion PG shares under a private placement.

Under the transaction, the shares — at $0,001 each — will fetch $1 million as part of $3,5 million fresh capital required by PG.

“The private placement shares are subject to claw back from PG shareholders who wish to reduce the impact of dilution resulting from the private placement,” said PG’s chief executive, Hillary Munyati.

He added that shareholders who opt to claw back their entitlement of the private placement shares from OM can do so from the 17th of this month up until April 7, 2014.

This comes as in 2012, OM, together with PG Bison Africa Limited, acquired a 27,9 percent stake worth  $3 million that PG held in its erstwhile subsidiary, Manica Boards and Doors, as it sought funds to boost its working capital and reduce its short debt.

PG, which has been trading in the red since adoption of the multi-currency system in 2009, is seeking fresh capital.

Negotiations are also underway with BancABC.

It intends to use the funds in strengthening its working capital position by purchasing additional stock.

Currently, the company’s stock mix is suboptimal, characterised by a number of slow moving lines.

Munyati, told shareholders in a circular that as at September 30, 2013, PG had a negative equity position of $3,3 million.

“The company is thus technically insolvent, and unless it enters into an arrangement with creditors, it is likely to go into liquidation,” he said.

Munyati said BancABC had agreed to advance a $1,1 million loan to the company while Old Mutual had also committed to inject $1 million through a one billion share swap deal.

“The company has successfully secured buyers for $950 000 worth of properties. Sale and purchase agreements have already been signed in line with these disposals subject to the conditions precedent,” he added.

The construction firm is also in discussion with various financial institutions to secure an additional $440 000.

“From a cash flow perspective, this amount will not be immediately required.

“However, post the balance sheet restructure that PG’s cleaner balance sheet will present opportunities for the company to secure facilities in the form of guarantees or letters of credit from local banks as required,” Munyati said.

PG — which by September 30 last year owed $16,3 million to trade and other creditors — has begun an extensive operational restructuring resulting in the merger of PG Building Supplies and PG Timbers.

Munyati noted that if the company is successful in securing the $3,5 million capital, PG would be positioned as a lean and adaptive market player with a cleaner balance sheet and stable working capital position.

“This augurs well for the company’s recovery and growth prospects in a market which is expected to be driven by the individual home builder for the foreseeable future,” he said.

Last month, PG postponed its scheme meeting and extraordinary general meeting to align with the Zimbabwe Stock Exchange listing requirements.

The group was supposed to have a scheme of arrangement with its lenders, creditors and debenture holders as well as pursue a $3,5 million rights offer.

On the proposed creditors’ scheme, only one creditor, Sherwood International’s Zimbabwe unit Super Group Trading            is secured.

PG owes $1,4 million to Sherwood which is secured by a guarantee from a local financial institution. Under the proposal, Sherwood will continue to supply the group.

The remaining creditors, owed about $16,3 million will be offered either PG ordinary shares in lieu of amounts owed at a price of $0,001 by way of private placement or a deferred payment plan to settle the amounts over a 36-month period plan.

The scheme will also seek to have debenture holders convert their debentures to PG ordinary shares.

The debentures are worth $6,72 million.

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