Bernard Mpofu, Chief Business Reporter
A UNIT of frontier markets business giant, Renaissance Group, has aborted its plans to acquire a local stock broking firm over controversial indigenisation and empowerment regulations, The Financial Gazette's Companies and Markets (C&M) has learnt.
Authoritative sources this week told this newspaper that a proposed acquisition of Lynton Edwards Securities (LES) by Renaissance Capital (RenCap) collapsed after RenCap withdrew from the deal due to indigenisation concerns.
Zimbabwe has a law in place compelling foreign and white-owned companies to dispose of 51 percent interest to black Zimbabweans.
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 volte-face by RenCap comes barely two months after the Competition and Tariff Commission (CTC) announced that it would undertake investigations into the transaction amid concerns of a monopoly situation arising from a proposed acquisition of a 75 percent stake in LES by RenCap.
The take-over would have resulted in RenCap minimising its cost of trading on the Zimbabwe Stock Exchange and creating possible dominance by LES on all foreign investor deals. Stockbrokers charge one percent brokerage fees on every transaction carried out.
CTC assistant director in charge of competition, Ben Chinhengo, told C&M that RenCap had pulled out of the deal.
"The transaction was withdrawn. They wrote to us towards the end of the year in 2011 informing us that they did not agree with indigenisation requirements they were required to meet," said Chinhengo
LES was formed in 2004 and has over the years grown to become one of the biggest players on the country's capital markets.
In a general notice 471 of 2011 issued last year in November, the CTC said: "It is hereby notified that, in terms of Section 28(2) of the Competition Act [Chapter 14:28] ("the Act"), that the Competition and Tariff Commission ("the Commission"), after receiving a merger notification in terms of Section 34A of the Act, regarding the proposed acquisition of a 75 percent stake in Lynton Edwards Stockbrokers by RenCap Zimbabwe Holdings MLE, intends to investigate the merger in terms of Section 28.
"The Commission will, in accordance with the provisions of the Act, examine among other things whether the transaction is likely to substantially lessen competition in Zimbabwe or any part of Zimbabwe, or is likely to result in a monopoly situation that is contrary to public interest," the notice said.
The probe gave all interested stakeholders, including competitors, suppliers and customers, an opportunity to submit written presentations regarding the proposed merger.
RenCap head of Zimbabwe and Zambia operations, Robert Reid, however, reiterated that no acquisition talks were going on between the two capital markets players. Last September Reid dismissed reports of this proposed acquisition when this paper first broke the story.
"What I spoke about in September remains 100 percent true. We enjoy strong relations with all local stockbrokers and we have no intention to apply for a licence or bring another third party broker," said Reid on Monday.
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.
Renaissance Partners, RenCap's principal investment unit, is a major shareholder in Bubye River Conservancy, 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.
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