Zimpapers Logo

Senior Business Reporter
FBC Holdings is seeking shareholder approval to distribute the group’s 58,3 percent combined shareholding in Turnall Holdings Limited by way of a dividend in specie to allow compliance with the Reserve Bank of Zimbabwe requirements. A dividend in specie is usually declared in a given amount satisfied by the transfer of assets.

Section 34 of the Banking Act (Chapter 24:20) prohibits banks from continuously holding shares in a company that engages in any business outside the banking operations.

“The primary intentions of the disposal by way of a dividend in specie are to ensure that FBC Bank complies with section 34 of the Banking Act (Chapter 24:20), which prohibits FBC Bank Limited from continuously holding shares in a company which engages in any business or activity other than approved banking business, without the approval of the Reserve Bank of Zimbabwe, which approval has been granted annually; to ensure that the group focuses more on its primary financial services operations . . . ,” FBCH chairman Herbert Nkala said in a circular to shareholders yesterday.

FBCH controls 58,32 percent shareholding in Turnall, a building products entity whose business is not in line with the group’s core activities in the financial services sector.

Last week, Nkala indicated Turnall was facing viability challenges due to the difficult economic environment that saw its losses increasing 23 times in the first six months of the year.

At a meeting held on August 25, 2014, Nkala said the board of directors declared a dividend in specie where the company would distribute to shareholders 262,383,056 of the 287,536,313 shares held by the group in Turnall.

He said the balance would be retained to cover the costs associated with the transaction adding that the shares would be distributed to registered shareholders in FBCH books at the close of business on October 17, 2014.

“The directors are proposing to distribute the group’s combined shareholding in Turnall by way of a dividend in specie to shareholders of FBCH. The board therefore seeks the approval of shareholders to distribute to shareholders ordinary share in Turnall Holdings Limited,” added Nkala.

The transaction will have to go through an extraordinary general meeting scheduled for September 26, 2014.
Nkala said the acquisition was a result of a realisation of pledged security on a non-performing loan, adding the group always had intentions of disposing of its entire shareholding in Turnall.

“In view of the prevailing liquidity environment, the dividend in specie route has been viewed as the most feasible approach that will achieve the objective of transferring the aforementioned value in Turnall shares to shareholders of FBCH,” he said. Nkala said voting against the proposed transaction would result in non-compliance with the country’s banking regulations and put the company’s main line of business under threat.

Upon successful execution of the transaction, Turnall Holdings will no longer be a subsidiary of FBCH.
“The transaction will result in FBCH retaining its identity as a financial services group with business interests in commercial banking, microfinance, mortgage finance, non-life insurance, non-life reinsurance as well as stock broking,” Nkala said.