Business tycoon vows to block CFI plan
Bernard Mpofu, Chief Business Reporter
Conglomerate, CFI Holdings' plans to recapitalise face an impediment after controversial business tycoon and shareholder, Nicholas van Hoogstraten, said he will not support the capital raising exercise unless the current board steps down, The Financial Gazette's Companies and Markets (C&M) can exclusively report.
After posting a loss for the full-year to September 30, 2011, CFI, a Zimbabwe Stock Exchange-quoted concern, announced that the group was on the market to raise capital by seeking a strategic partner for its poultry division and through a mix of equity and appropriately priced medium and long-term debt. CFI has interests in three units - retail, poultry and specialised division.
The diversified group intends to raise nearly US$8 million through disposal of non-core assets to retire expensive debts and finance working capital. This capital raising exercise includes seeking new investors to take up shareholding in Victoria Foods and Crest Poultry. Market speculation suggests that the group could be in talks with Indian investors who are keen to acquire Victoria Foods.
The group board also proposed to undertake a capital raising transaction at holding company level, combining an appropriate mix of equity and appropriately priced medium and long-term debt.
Following a cautionary statement issued by CFI last month, van Hoogstraten said he would not support the transaction in what appears to be a payback to his past botched plan
to appoint a director into the group's board of directors. A CFI share register indicates that the British businessman, through his Messina Investments, controls 7,11 percent of CFI although he said his influence in the company could be three times higher than his shareholding.
Van Hoogstraten, however, told C&M that he controlled 14 percent of CFI directly and an additional seven percent indirectly.
"I'm not going to allow more money to go into a company that has been run down. What is the point of throwing good money after bad (money). If somebody has already eaten your money, are you going to give him more? That company can be turned around. It doesn't need the money, it has to chop off the dead wood .?.?.
"We were denied board representation and we are not making any condition like having a board representation to bring in the money because they can simply do so. It's too late for that, it's like Rainbow Tourism Group", said van Hoogstraten.
"The fact that they denied us representation shows that they are incompetent. Why would they deny us that? It's only out of fear and self-interest. None of them (current board) own any shares in that company. They represent their own interests."
Van Hoogstraten said he told CFI's financial advisors, Imara Capital in October last year that he had agreed to the capital raise exercise on condition that a new board was appointed. CFI has an eight-member board chaired by corporate lawyer, Simplisius Chihambakwe.
"Initially, I said to Imara, come back to me when the proposals have been formulated then I agreed in principle. I said I would agree to the plan once CFI gets rid of incompetent people. Companies need to address issues when they are in a position of strength. You can't deal with issues when you have got no choice," he said.
CFI, in a cautionary statement issued last month, said the due diligence process on the two subsidiaries had been completed.
"The directors of CFI Holdings Limited wish to advise all shareholders that the company is currently engaged in discussions that may result in a series of transactions that may have an impact on the value of the company's shares.
"Specifically, shareholders are advised that the company is engaged in negotiations with potential strategic partners regarding investments in Victoria Foods (Private) Limited and Crest Poultry Group (Private) Limited. Non-disclosure agreements have been executed with interested parties and a due diligence process has commenced. It is likely that conclusion of these investment initiatives will bring capital and efficiencies to the company's core operating divisions," read part of the cautionary statement.
"Further to this, the board has proposed undertaking a capital raise transaction at holding company level, combining an appropriate mix of equity and appropriately priced medium and long-term debt.
"Conclusion of these processes will significantly strengthen the financial standing of the company. Furthermore, general initiatives relating to the disposal of non-core assets continues. Specific efforts are being made to dispose of the company's shareholding in the Beira Grain Terminal and in Windmill (Private) Limited. Proceeds from these disposals will be applied to reducing expensive local debt."
CFI posted a US$6 million loss to September 2011 despite recording a 34 percent growth in revenue.
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