INDUSTRIAL Development Corporation (IDC), a wholly government-owned investment company, is courting suitors for its subsidiary, Chemplex Corporation, the country’s largest fertiliser and chemical manufacturer, the Financial Gazette’s Companies & Markets (C&M) has established.
IDC wholly owns Chemplex.
Sources with knowledge of IDC’s plans told C&M last week that financial advisors, Imara Capital, had been engaged to handle the disposal of its shareholding in Chemplex, but could not say how much shareholding IDC wanted to sell.
It is unlikely IDC would find a domestic buyer for its shareholding due to the liquidity crunch in the economy. The company would therefore be forced to court offshore investors for the share purchase.
Imara is well placed to assist in courting a foreign suitor due to its extensive networks outside the country. The country’s indigenisation laws stipulate that foreign shareholders can own up to 49 percent shareholding in a Zimbabwean company. Chemplex is involved in the mining and beneficiation of phosphate rock which is used in the manufacture of fertilisers.
It also manufactures sulphuric acid but requires about US$60 million to improve capacity.
“IDC has appointed Imara Capital to spearhead Chemplex Corporation’s privatisation,” a source told C&M.
IDC chief executive officer, Michael Ndudzo (pictured), could not be reached for comment. But IDC spokesman, Derek Sibanda, said when contacted for comment: “Imara Capital has been retained to handle the capitalisation process. The potential strategic investors are being invited to invest in Chemplex or in any one or more of the company’s subsidiaries. The extent of IDCZ’s dilution will be determined by the target vehicle for investment and the laws of Zimbabwe.”
Imara Capital confirmed the development but declined to reveal finer details.
“Yes we are working on the issue on behalf of IDC but I can’t say much at the moment because of the agreement that we signed with IDC,” said Tawanda Masose, a corporate finance executive with Imara Capital. “If you want more information you can talk to IDC,” Masose said.
Chemplex is experiencing cash flow challenges exacerbated by expensive debt. Its subsidiaries include Zimbabwe Phosphates Industries, Dorowa Minerals, and the country’s sole phosphate producer, Chemplex Corporation, Chemplex Animal &Public Health, GD Haulage and G&W Industrial Minerals. Chemplex also holds a 50 percent shareholding in the Zimbabwe Fertiliser Company (ZFC) and a 36 percent stake in Sables Chemicals, the country’s sole ammonium nitrate maker. IDC controls more than 15 companies with interests across different industrial sectors.
One of only a few State-owned firms to have consistently declared dividends since independence in 1980, IDC’s fortunes were affected by an unprecedented economic crisis that swept through the country during the decade to 2008, debilitating industry and ravaging the economy, now without a domestic currency and grappling with a liquidity crunch. IDC has since last year been courting suitors for cash to recapitalise its ailing subsidiaries, with officials indicating they were looking for about US$140 million.
“All our subsidiaries are in need of fresh capital injection and it’s a miracle that they are still operating. We are therefore looking for strategic partners with the capacity to inject about US$140 million in total, a move which will stimulate production in these subsidiaries,” Ndudzo said in an interview last year.
“In this case, we do not mind having our shareholding in these distressed companies diluted,” he said.
Government has been unable to bail out the investment company with cash to allow it to recapitalise its subsidiaries. The fact that IDC is on the United States sanctions list could hamper direct foreign capital investment into the company. IDC’s other subsidiaries include food processor, Olivine, which it jointly own with AICO Africa. Reports last week suggested IDC was on the market for a buyer for its 51 percent stake in Olivine.
AICO Africa, now Cottco, holds a 49 percent stake and is also contemplating pulling out of the company or may have already sold its stake to IDC, according to reports. Olivine has been failing to produce adequate supplies due to inadequate working capital. Other IDC subsidiaries include Zimglass Industries, the country’s sole manufacturer of glass packaging, and automotive group Motec Holdings. The two firms require recapitalisation of US$15 million and US$8 million respectively.
Zimglass is controlled 100 percent by IDC which owns a 75 percent stake in Motec. The other 25 percent in Motec is owned by Itochi Corporation of Japan. IDC’s other companies include Zimbabwe Grain Bag (49 percent), Sunway City (97 percent), Sino-Zimbabwe Cement Company (35 percent), Madzone Enterprises (17,62 percent) and Almin Metal Industries.
IDC wants to completely disinvest from some of its smaller subsidiaries such as Grain Bag Zimbabwe. It requires US$1,6 million for its 49 percent stake in Zimbabwe Grain Bag.
Treggers controls 52 percent shareholding in the company and Ndudzo recently said they have a right of first refusal in the event of IDC opting to sell.
IDC would sell its shareholding in Grain Bag Zimbabwe to a third party should Treggers fail to take the offer.