FMHL finds buyer for RTG stake

FMHL finds buyer for RTG stake
FMHL chief executive officer, Douglas Hoto

FMHL chief executive officer, Douglas Hoto

FIRST Mutual Holdings Limited (FMHL) says it has found a buyer for its 19,8 percent stake in hotel concern, Rainbow Tourism Group (RTG), from which it has been seeking to exit for the past two years.
The integrated insurance firm reclassified RTG from a strategic investment to an available-for-sale asset over two years ago.
“We are currently in discussions with some investors for our shareholding in RTG, but I cannot divulge more details due to confidential clauses,” FMHL chief executive officer (CEO), Douglas Hoto, told The Financial Gazette.
Last year, the company had agreed to sell the shareholding to British tycoon, Nicholas van Hoogstraten, who already controls about 36 percent shareholding in RTG. The deal could, however, not be completed after FMHL gave van Hoogstraten 72 hours to close the transaction.
This week, van Hoogstraten told The Financial Gazette he was still interested in the shareholding, but could not reveal if he was still in talks with FMHL for the acquisition.
“It is correct that it was my intention and still is my wish to buy the 19 percent stake in RTG. Obviously, RTG needs proper management with experience of hotel ownership,” said van Hoogstraten.
He, however, expressed concern over a recent loan default by the hotel and leisure company.
“There is still currently a problem that came to my notice where a disputed and illegal NSSA ‘loan’ for some $14 million has been defaulted and, as a result, RTG is effectively insolvent. This is due to corruption and mismanagement going back several years,” he said.
NSSA, the National Social Security Authority, is a controlling shareholder in RTG and also a major shareholder in RTG.
FMHL ― whose subsidiaries include First Mutual Wealth, First Mutual Health, Pearl Properties, First Mutual Life and Tristar Insurance ― believes its shareholding in RTG carries an estimated value of over $3,5 million.
FML made the decision to sell RTG shares to concentrate on its core business, which is the insurance sector, as well as general financial services interests.
The Zimbabwe Stock Exchange-listed hotelier, which has been struggling to pay off legacy debts, this year repaid debts to international financiers amounting to over $10 million.
The group’s CEO, Tendai Madziwanyika, recently indicated RTG was now stable and expected to register significant growth in the 2017 financial period.
“We view this year as a watershed year for us as RTG. We are now well-positioned to benefit from the recent developments in the local tourism industry… In the past four years, we have been trying to get the company on the right footing and we are now well-positioned for take-off,” he said.
The RTG boss said the group, which has streamlined and restructured operations since 2012 and reduced annual staff costs by $3 million, was also consolidating local operations after exiting from loss-making operations locally and in the region.
It exited from the Beitbridge and Mozambique operations after terminating leases on Rainbow Beitbridge Hotel from May 31, 2016 and Hotel Mozambique from September 30, 2016.
“The exit of Rainbow Hotel Mozambique was due to a depressed market caused by political instability in the northern part of Mozambique as well as unsustainable translation risk,” he said.
Madziwanyika said the listed hotelier was also set to receive a $2 million settlement pay-out from its Zambian landlord following a ruling by the country’s Supreme Court in favour of the Zimbabwe Stock Exchange-listed hotelier.
This was after RTG’s foreign revenues surged 20 percent in the year to December 31, 2016 to $8,1 million, from $6,7 million the previous year, constituting a 38 percent growth in foreign revenue contribution over a four year period from the group’s 2012 position.
The group’s revenue however dipped 11 percent from $26,9 million to $24 million in 2016.
The group is also in the process of restructuring its $17,5 million debt to shareholder National Social Security Authority.
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