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Nqobile Bhebhe, [email protected]

ECOCASH Holdings is set to transfer all shares to Econet Wireless Zimbabwe that it owns in the Financial Technology Businesses, valued at $509 billion, under the proposed Scheme of Reconstruction, payable in cash and partly in Econet Treasury shares.

Econet will now assume control of the mobile money division of EcoCash, the on-demand service Vaya Technologies Zimbabwe, Econet Insurance, Econet Life, Mars Zimbabwe, and Maisha Health.

The separately listed companies announced that they are planning to undergo a scheme of reconstruction, which involves the issue of ordinary share capital by a company to the shareholders in another company.

The transaction will result in the Financial Technology Businesses becoming a subsidiary of Econet and EcoCash Holdings, remaining with Steward Bank Limited as its only subsidiary.

In a notice to shareholders, chairman, Dr James Myers said the proposed transaction is a Scheme of Reconstruction in terms of which, EcoCash Holdings will transfer to Econet, all the shares that it owns in the Financial Technology Businesses, valued at $509 billion (equivalent to 521,861,057 Econet Shares) with Steward Bank Limited as its only subsidiary.”

He noted that in 2018, Econet decided to unbundle these businesses that had developed within the Mobile Network Operation (MNO) business, as the value of these businesses was not fully reflected in the Market Capitalisation of the MNO business.

 EcoCash Holdings and Econet demerger became effective upon approval by the members at the EGM, on November 19,            2018.

This led to the subsequent listing of EcoCash Holdings on the ZSE on December 18, 2018.

Dr Myers said that after the demerger in 2018, EcoCash Holdings had been expected to attract a new set of investors, whose main interest was in Financial Technologies.

“This was also in line with how other international mobile network operators had demerged their fintech business units including Airtel and MTN. The adverse economic conditions that have prevailed since the demerger have prevented EcoCash Holdings from attracting foreign portfolio investors.

“The obtaining situation where the Company and EcoCash Holdings have the same controlling shareholders means that the same group of shareholders are being subjected to duplication of resources, thus eroding shareholders’ value.

“The fact that Steward Bank is a subsidiary of EcoCash Holdings has also resulted in the perception that the Financial Technology Businesses are direct competitors to local banks, whereas the services are complimentary.”

 Dr Myers added that it has caused operational and Customer Relationship Management challenges and has constrained the growth of the Financial Technology Businesses’ relationship with the wider financial services market.

In these circumstances, Dr Myres said it is imperative to separate Steward Bank Limited from the Financial Technology Businesses, to avoid any confusion that might limit the growth of the businesses.

 “Econet proposes to acquire the Financial Technology Businesses, develop them, so they may leverage synergies that include the MNO’s subscriber base and delivery channels, to fully develop their sustainable value creation competitiveness.

Dr Myers noted that the book value of the company’s assets as at August 31, 2023, was $3,3 trillion.

“The book value of the Financial Technology Businesses as at 31 August 2023 was $325 billion. Therefore, the book value of the Financial Technology Businesses being acquired by Econet, being less than 50 percent of the book value of Econet as at 31 August 2023, means that the Scheme of Reconstruction does not qualify as a Major Asset Transaction on the part of Econet as defined by Section 226 of the Companies And Other Business Entities Act (Chapter 24:31).

“The Transaction is a Category Three Transaction in terms of the Listings Requirements of the Zimbabwe Stock Exchange. This is because the value of the Financial Technology Businesses being acquired from EcoCash Holdings is less than 20 percent of the Company’s market capitalisation, based on the 30 Day Volume Weighted Average Price of Econet for the period to 16 January 2024, being the last practicable date immediately before the transaction was announced to the public.”

Shareholders approval is not required for a Category Three Transaction, Dr Myers added.

Regarding management and employee changes, no decision has been made by the Company in relation to specific actions that will be taken as part of the business operational and administrative review.

“Prior to any decisions being made, detailed discussions will be held between employees and appropriate stakeholders. One of the main purposes of the Scheme of Reconstruction is to eliminate the duplication of structures and costs arising from the current group ownership structure. The rationalisation structure may impact on employees.

“Any changes that will affect employees will be done in compliance with the Labour Act (Chapter 28:01).”