Mergers, Acquisitions and Financial Results

Telecommunications mogul Strive Masiyiwa's Econet Wireless Holdings has broken into the banking industry following its $1.5 billion acquisition of a 10 percent stake in Kingdom Financial Holdings Limited (KFHL).

The deal, executed through a special bargain for 35.8 million shares, went through the Zimbabwe Stock Exchange (ZSE) on January 6 2005 and was handled by Kingdom Stockbrokers, a KFHL subsidiary, sources indicated this week.

It will now pave way for the appointment of Econet's representatives to the KFHL board of directors.

The telecommunications group's entry into Kingdom, one of the few locally owned banks to survive a financial sector crisis that has resulted in the closure of at least 10 institutions, comes a few days before an extraordinary general meeting of shareholders expected to approve a recapitalisation scheme.

This will be the first step by KFHL to raise capital amounting to $100 billion, a proposal already supported by Econet and other existing shareholders constituting about 60 percent of the KFHL's share capital.

The sources said that Econet had bought the shares - totalling 35 million at a special bargain price of $40 per share - from a vehicle linked to KFHL founder and former chief executive officer, Nigel Chanakira.

Chanakira, who resigned as the banking group's deputy chairman in November 2004, has been a director of Econet since its listing on the ZSE in 1998.

Sources said the Johannesburg-based Masiyiwa, personally took interest in the transaction, which analysts said is meant to cushion his long-time ally Chanakira, from being diluted by other players in the diversified financial group.

An Econet spokesman confirmed the transaction, saying the telecommunications group viewed the acquisition as a strategic investment and were likely to increase their shareholding in the banking group.

"This is a strategic investment for us and eventually we would be keen to be at par with Meikles Africa as KFHL's major institutional investor," said the spokesman.

Meikles Africa is the major shareholder in KFHL with a 24.73 percent stake, while institutional investment giant Old Mutual comes second with a 10.18 percent interest.

"Although a lot of banks had been pursuing a tie-up with Econet because of its strong cash position, KFHL has always had the edge because of its historical relationship with Econet," the spokesman said.

Among its various investments in the telecommunications and information technology sectors, Econet is the major shareholder in Transaction Processing Systems, a company providing IT and electronic banking services to the country's financial services sector.

The telecommunications group said while it would continue with its relationship with other banking sector companies, it would use its latest share ownership opportunity in KFHL to grow the bank using the latest technology available to the sector.

The transaction positions Econet to participate in the forthcoming recapitalisation exercise, should shareholders approve the resolution at the January 17 EGM.