A possible merger between leading financial services institutions, CBZ Holdings and ZB Financial Holdings is said to be giving the Competition and Tariff Commission (CTC) serious headaches, amid fears it could contravene competition rules, Business Times can report.
Analysts said that such a merger between the two institutions which control a huge chunk of the market share could destabilise the banking industry.
It is estimated that if CBZ and ZB merge and then combine with First Mutual Holdings, the group will have an asset base of about US$2.5bn.
This will result in a financial services behemoth which is expected to be a dominant force in the market.
CBZ and ZB have a combined network of more than 100 branches across the country.
This may lead to anti-competition ground as this may create or enhance the ability of the remaining firms to act in a coordinated way on some competitive dimension, experts said.
“The potential merger proposal is yet to reach CTC relevant departments but has caused some panic in the Commission as many don’t know how to handle the issue involving the government and some people close to the corridors of power. Many are not free to handle the issue or know what to do whether to allow the merger, prohibit it, or allow it if certain conditions are met,” a source close to developments told Business Times this week.
He said in other countries before a large merger happens, the antitrust regulators such as the CTC and the Department of Justice meet to find a common ground but in Zimbabwe that is not the case.
The Commission may allow the merger to go on a common condition that the transaction will be allowed if the firm agrees to sell off certain parts.
CBZ Holdings, which owns CBZ Bank and other entities, is the core of the proposed merger. It will have five major divisions: banking, insurance, investment, property and agriculture.
The post-merger entity to be created through the acquisition will rival Old Mutual Zimbabwe.
The proposed merger comes after CBZ acquired a 31.22% stake in FMHL from the 66.22% stake held by the National Social Security Authority (NSSA).
It is understood that the proposed merger would be led by CBZ Chairperson Marc Holtzman, a U.S. international banker.
Last year, the NSSA disposed of its 37.79% stake in ZB Bank to a mysterious buyer.
The merger could see the buying out of ZB’s second-largest shareholder, Nicholas Vingirai who holds 21.44%.
However, it is understood that Vingirai has not been approached with an offer to dispose of his stake in ZB.
Observers said Vingirai stands between ZB and CBZ merger as his decisions will determine how ZB will progress in merging with other players in the merger.
“If he does not cooperate his stake may be bought out but he may frustrate the processes,” a source said.
Already, ZBFH is accelerating the acquisitions of minority interests in ZB Bank Limited, ZB Building Society, Interbank Banking Corporation in a bid to take control of all the subsidiaries under ZB for easy administration.
The long-standing legal dispute between the company (ZBFHL) and THL regarding the ownership of Intermarket Holdings Limited (IHL) was resolved by the withdrawal of THL’s appeal at the Supreme Court of Zimbabwe.
This followed a settlement arrangement in which the government of Zimbabwe ceded its shareholding in the ZBFHL to THL in transactions.
In 2004, the government through the Reserve Bank of Zimbabwe seized IHL, which Vingirai controlled through THL with the administration saying it was bailing out troubled banks at the height of hyperinflation.
The administration later sold IHL to ZB.
Assets that belonged to THL included Intermarket Building Society, Intermarket Discount House, Intermarket Life Assurance, and a considerable equity stake in Mashonaland Holdings.
These form the bulk of the ZB group’s asset base.
For more than 10 years, Vingirai has been pushing for a mutual separation of the ZB and IHL, which have been operating as a single entity.
Vingirai felt the shareholding IHL held in the group was relatively less than it is entitled to.
However, a few years ago, the government and Vingirai appeared to have struck a deal after the administration offered more than 20% stake to Vingirai.
NSSA, which was a major shareholder in the group then with 37.8% stake, resisted the allocation of further shares to THL, which had 21.44% shareholding, resulting in Vingirai approaching the Supreme Court.
However, NSSA, which also forced the removal of three THL nominees to ZB board — Mike Mahachi, Mike Manyika and Zororo Muranda, including the return of Vingirai as a non-executive director, has since offloaded its stake in ZB.
With all parties agreeing, ZBFH will take full control of all subsidiaries and strategic business units.
The NSSA’s decision to offload shares in CBZ aligns with its statement earlier this year that it will reduce its shareholding in FMHL to create a strategic alliance around its subsidiary.
The agency believes the new project will be similar to entities in Nigeria, South Africa, the United Arab Emirates and Southeast Asia, operating in banking, insurance, mining and agriculture.
CBZ directors advised shareholders that the merger and FMHL share acquisition will substantially impact the price of the companies’ securities.
CBZ Holdings and ZB Financial Holdings Limited have notified their shareholders of separate potential acquisitions that could have an impact on securities prices.
In a cautionary statement dated June 20 2022, CBZ said negotiations that could have a material impact on its securities prices are ongoing.
“ZB Holdings Limited advises its shareholders that one of its company’s shareholders is engaged in negotiations for a potential acquisition of a control block of securities, which if concluded successfully, may have a material effect on the companies’ securities price,” Group Company Secretary Tinashe Masiiwa said, adding that shareholders have to exercise caution when dealing with the company’s securities until a further announcement is made.
On its part, CBZ said negotiations for a potential acquisition were also ongoing.
In a statement dated June 17 2022, CBZ Holdings Group Legal Corporate Secretary, Rumbidzai Jakanani said: “Shareholders are advised that CBZ Holdings Limited, “the Company”) in negotiations for a potential acquisition which if successfully concluded may have a material effect on the price of the Company’s securities, the full impact of which is currently being determined.
“Accordingly, shareholders are advised to exercise caution when dealing in the company’s securities until a full announcement is made.”
The law bars mergers when the effect “may be substantially to lessen competition or to tend to create a monopoly”.