Bernard Mpofu,Chief Business Reporter
RENAISSANCE Capital (RenCap), a unit of Renaissance Group, is closer to concluding a planned takeover of one of Zimbabwe's largest stock broking firms, Lynton Edwards Securities (LES), in a transaction that is likely to upset small brokerage firms that had benefitted from the Russian investment bank's business.
RenCap is a leading independent investment bank operating in Russia, the Commonwealth of Independent States, Central and Eastern Europe, Africa, Asia and other high-opportunity emerging and frontier markets. The firm is an established and trusted advisor to governments, corporate and institutional clients in its core investment banking offerings such as mergers and acquisitions, equity, debt, structured solutions and derivatives.
The Zimbabwean unit of the group has, however, not played a significant role on the domestic market due to the listless nature of the domestic economy, which has not yet developed since emerging from a quagmire over two years ago.
But RenCap has been a significant player on the domestic equities market, spreading its business across several securities traders. The proposed transaction was therefore said to have unnerved a number of unstable stockbroking firms which fear RenCap will now direct all its business towards LES.
The Financial Gazette understands that RenCap, an active foreign investor on the Zimbabwe Stock Exchange (ZSE), has approached the Competition and Tariffs Commission (CTC) seeking regulatory approval for the acquisition of LES.
LES was formed in 2004 and has over the years grown to become one of the biggest players on the country's capital markets.
CTC assistant director in charge of competition, Ben Chinhengo, confirmed that the commission was scrutinising a proposed transaction, describing it as a merger between the two companies.
"The commission is currently examining the merger. It takes up to 90 days and we are within that scope," Chinhengo said.
LES and RenCap are playing their cards close to the chest. They both declined to confirm the transaction when contacted this week, but analysts said it was pre-mature for the firms to discuss the deal in public.
"We were in talks three years ago but nothing was concluded," said LES managing director, Murray Lynton-Edwards.
Renaissance Group's head of Zimbabwe and Zambia operations, Robert Reid, said no deal had been reached between his organisation and the brokerage firm.
"We enjoy a very strong relationship with local brokers. We value those relationships and we are always talking to them and that is how we have set up ourselves in Zimbabwe.
"At the moment we have no intention to acquire any local broker or, to seek to grow our equities business organically by applying for a licence," said Reid.
On indigenisation, he said: "We are hosting on a weekly basis, the biggest corporates from Russia, India, China and other parts of Africa. Clearly, one of the key questions they ask is what is going on with indigenisation. Those that are interested in investing here understand that there is a need for some form of local empowerment, but the challenge has always been in the implementation of these policies.
"It is not unique to Zimbabwe; South Africa has been trying to formulate and implement BEE (black economic empowerment) policies since the 1990s."
But stockbroking sources said the deal was now closer to being finalised, noting that RenCap's choice of LES was unsurprising since they had always acted as their preferred broking firm.
The takeover means that RenCap would minimise its cost of trading on the ZSE and create possible dominance by LES on all foreign investor deals.
Stockbrokers charge one percent brokerage fees on every transaction carried out. The sources said LES, which competes neck-and-neck with Imara Edwards Securities, was one of the few profit-making brokerage firms on the ZSE.
Official statistics show that the ZSE is largely driven by foreign investors, whose participation continue to rise steadily from 22,42 percent in January, 52,97 percent in March and peaking at 71 percent in May.
"We were informed that the deal is now at an advanced stage. Should the deal go through, LES would have a solid shareholder on its books and its deal floor will be immensely improved.
"For a stock broking firm of its size, the acquisition could have been in the region of US$1 million," said a stockbroker who requested anonymity.
RenCap was founded in 1995 as a Moscow-based investment bank.
Renaissance Partners, RenCap's principal investment unit, is a major shareholder in Bubye River Cons-ervancy, Africa's largest privately held wildlife conservancy, encompassing 324?000 hectares in southeast Zimbabwe. It is located in the Lowveld, 60km from the South African border, straddling the Bubye River.
RenCap has also invested in a 290-hectare urban development project in Zimbabwe and has board representation in CBZ Bank, the country's largest commercial bank by both assets and lending.
RenCap began investment banking operations in Africa in 2006, committing over US$5 billion in capital-raising and financial advisory transactions. The group provided financial advisory in Essar Africa Holdings Limited's US$750 million acquisition of Zimbabwe Iron and Steel Company, now NewZim Steel.
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