CBZ/FMHL inks blockbuster deal | Business Times

LIVINGSTONE MARUFU

 

Financial services group, CBZ Holdings yesterday struck  a binding  agreement with First Mutual Holdings Limited (FMHL), to combine the two businesses  already with financial wherewithal  to create a market dominating behemoth, Business Times can report.

Multiple analysts told Business Times that the monster ranks as the largest ever seen in Zimbabwe.

Through their formidable merger, CBZ and FMHL would pool their resources to build a solid balance sheet that would make them a powerful force on the domestic market.

Exploiting the synergies between the two companies should create moral value for the merged company, allowing it to expand its property and insurance operations and serve a larger customer base.

Speaking to Business Times on the  sidelines of the signing ceremony at Zimbabwe Stock Exchange headquarters in Harare yesterday, CBZ CEO, Blessing Mudavanhu  said the heavyweight will be better  able to compete in the local and global  markets.

Mudavanhu made a hint that the behemoth was also courting other banks and businesses to merge with it in order to form a sizable organization that will account for a sizable portion of the nation’s GDP.

It is understood that CBZ is in active talks to merge with  another financial services group, ZB Financial Holdings Limited. If it succeeds, this will see the group with an asset base of over  US$2.5bn.

“It is very important for us because  we are on a path to create a local entity that has a strong balance sheet.  In the past five years we have been growing organically to strengthen our balance sheet but we are also trying to grow inorganically where we have synergies with so many entities be it ZB or Stanbic or any other bank.

“We are willing to pursue these synergies. We should have a balance sheet that will be able to attract foreign funding with local entities dominating. We need Zimbabwean entities that have better risk tolerance for the country,” Mudavanhu said.

“Our strategic thrust on the significant acquisition is to move  towards merging  the operations of CBZ and FMHL to achieve scale needed to compete against larger corporations  in Zimbabwe and the region.”

According to Mudavanhu, the merger will lead to the creation of a sizable balance sheet that will enable the behemoth to partner with other global players and develop financial institutions.

“What you are seeing today is the coming together of  local entities to create the required strength.We have never had a deal of  such magnitude in Zimbabwe. When you hear the President Emmerson Mnangagwa talk of Nyika inovakwa nevene vayo it’s not  a joking statement,” Mudavanhu said.

According to him, the business’ operational units will benefit from the transaction’s diversity and synergy.

“The exploitation of synergies  between the two businesses should unlock moral  value  for the combine identity , looking to enhance  its insurance  and property business further  and widen its product offering to its significant  client base.

“The combining of these with the advantages  of the largest bank in the country will present  a well oiled bancassurance  model; to the Zimbabwe market.

“These businesses combined will expand  the trading abilities  of both  entities across geographies thereby permitting  the extension  in product management  and distribution capabilities, improving  customer  product  offerings  and better absorbing market shocks  through a deeper diversified capital base,” Mudavanhu said.

As it introduces the group to the insurance industry, the FMHL business model presents a natural fit between itself and CBZ.

The regional operations of the insurance company, according to FMHL CEO Douglas Hoto, will serve as a springboard for CBZ subsidiaries’ expansion in the area.

“We are building a local entity so that we can attract foreign investors who can give us significant investment as right now if we call a foreign investor he or she will give us pittance as we don’t have strong institutions.

“We would like to grow our balance sheet, revenue and increase regional presence so that when an investor comes, he or she will pay huge amounts  for an investment,” Hoto said.

“I believe that this transaction is actually the beginning of a big thing to come as we combine the two.”

The merger of CBZH and FMHL, according to acting general manager of NSSA Charles Shava, marked the beginning of a new era on the domestic front.

“What is gratifying is that NSSA remains a significant shareholder in both CBZH and FMHL. We are confident that this strategy will enhance the sustainability of the NSSA fund to the benefit of our members and the country at large. We look forward to enhanced value from the strategic collaboration between CBZH and FMHL. NSSA expects and shall demand increased dividend payouts from both FMHL and CBZH to help towards our quest to become a world-class provider of social security by 2030,” Shava said.

In order to unlock value for the benefit of members, including pensioners and other vulnerable groups, Shava said that in 2020 NSSA began a strategy for investment refocus that involved consolidation and optimization of its investments.

According to him, NSSA adopted a phased strategy to achieve this goal, with phase one entailing the merger of short-term insurer NicozDiamond into First Mutual through the sale of NSSA’s stake in NicozDiamond in exchange for FMHL shares.

“The transaction helped strengthen FMHL’s short-term insurance business and solidified its market standing as one of the leading insurers in the country. This also strengthened NSSA’s investments in the insurance business cluster,” Shava said.

The sale of NSSA’s stakes in Fidelity Life and ZPI as part of a share swap with Zimre Holdings Limited constituted the second stage of our strategy to refocus on the insurance industry. This phase also involved the consolidation of ZHL’s strategic business units Fidelity and ZPI.

This left crucial cross-linkages for the NSSA insurance sector investments centered on FMHL and ZHL.

The third stage of FMHL’s consolidation and refocusing strategy involved enlisting a strategic partner who could support FMHL during its subsequent growth stage.

NSSA had more equity in FMHL and other companies than was allowed under the listing rules’ 35% cap.

“As a result, a partial divesture from FMHL was inescapable and was thus intended to meet compliance issues in line with our ethos of good corporate citizenry. We enlisted the services of an independent financial advisor to ensure that the transaction was in the best financial and strategic interest of NSSA and its members. The bids were evaluated from a technical and strategic fit, followed by a financial evaluation and CBZ Holdings emerged as the most technically and financially sound bidder,”he said.

 

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