eBusiness Weekly
Business Writer
Econet Wireless Zimbabwe, the leading mobile telecoms company in Zimbabwe, has released further details of its plans to reacquire the financial technology (fintech) businesses it previously demerged to EcoCash Holdings in 2018.
Econet proposes to acquire the Financial Technology Businesses (FTBs), develop them so they may leverage synergies that include the MNO’s subscriber base and delivery channels to fully develop their sustainable value creation competitiveness. This move signifies a significant shift in the Zimbabwean digital financial services landscape.
Regaining Control of Fintech:
The reacquisition involves bringing several key businesses back under Econet’s umbrella. These include Ecocash (Private) Limited – 100 percent, VAYA Technologies Zimbabwe (Private) Limited– 100 percent, Econet Insurance (Private) Limited – 90 percent, Econet Life (Private) Limited – 85 percent, MARS Zimbabwe (Private) Limited – 70 percent and Maisha Health Fund (Private) Limited 100 percent.
The Deal Structure:
In an announcement released this week Econet said it will acquire these businesses for a total value of ZWL$509 billion. The deal involves a combination of issuing Econet treasury shares and a cash component.
As part of the Scheme of Reconstruction and following the transfer to Econet of the FTBs, Econet shall pay the agreed total consideration that is equivalent to 521,861,057 Econet Shares, using 271,597,195 Treasury Shares that represent circa 50 percent of the purchase consideration (Shares Consideration) and the Cash Equivalent of 250,263,862 Econet shares will be calculated using the 30 Day VWAP of each Econet share to the period of date of payment (Cash Consideration).
Why the Reunion?
Econet says the move is strategic. By integrating its telecoms dominance with EcoCash’s strong fintech presence, Econet aims to become a more powerful competitor in the digital financial services market.
This could lead to a wider range of innovative financial products and services for Zimbabwean consumers.
On its part, in a circular to shareholders released this week, EcoCash Holdings said the obtaining situation where the company and Econet have the same controlling shareholders means that the same group of shareholders are being subjected to duplication of resources, “thus eroding shareholders’ value”.
According to Econet, once the restructuring has been finalised, some of the duplicated activities will be eliminated leading to quicker turnaround decision and cost efficiencies.
“Post the reorganisation, the consolidated business will streamline a number of activities with a view to regaining the lost customer market share, enhance revenue generation and improve profitability. Once the key drivers are repositioned, this should lead to recovery of the market capitalisation for the business,” noted Econet in a statement.
One of the main purposes of the Scheme of Reconstruction is to eliminate the duplication of structures and costs arising from the current group ownership structure.
The rationalisa0tion structure may impact on employees. Any changes that will affect employees will be done in compliance with the Labour Act (Chapter 28:01).
Approval Process:
Since the value of the acquired businesses is less than 50 percent of Econet’s book value, shareholder approval for the deal on Econet’s side is not required.
However, EcoCash Holdings shareholders will need to vote on the transaction.
On the part of Ecocash Holdings the proposed Scheme of Reconstruction is conditional on receipt of shareholder approval by a 50 percent majority excluding the votes of Econet.
In addition to the exclusion of Econet, the ZSE Listings committee has directed that Econet Global Limited be excluded from voting on the basis that they view Econet Global Limited as an Associate of Econet.
Approvals by Insurance and Pensions Commission of the change in shareholding in Econet Insurance (Private) Limited and Econet Life (Private) Limited; and approval by the National Payment Systems of the change in shareholding in EcoCash (Private) Limited will also be required.
The Road Ahead:
With this acquisition, Econet will once again control its entire fintech portfolio. This could lead to a more streamlined and efficient operation, potentially benefiting both companies in the long run. The EcoCash EGM to approve the transaction will be on the 17th of April 2024.
This reacquisition marks a significant development for Zimbabwe’s digital financial landscape. It remains to be seen how this move will impact competition and innovation in the fintech sector.
The Group structure after the Scheme of Reconstruction
