State-run pension fund, National Social Security Authority (NSSA), has moved to consolidate its insurance portfolio via a deal which will see First Mutual Limited (FML) acquiring a controlling stake in Zimbabwe’s largest short-term insurer, NicozDiamond.
NSSA is the anchor shareholder in both firms, controlling 51.33 percent of FML and 50.09 percent of NicozDiamond.
Last month, NSSA increased its stake in Zimbabwe’s largest short-term insurer NicozDiamond to 50.9 percent after a mandatory offer to minorities.
First Mutual Holdings and NicozDiamond yesterday released their respective cautionary statements with respect to NSSA’s intention to consolidate the two insurance companies, subject to shareholder and regulatory approval.
“The Directors of First Mutual Holdings Limited (“FMHL”) wish to advise shareholders and other stakeholders that the Company is contemplating the acquisition of a controlling interest in a company in the insurance sector,” FML said in a statement.
On the other hand short term insurer, NicozDiamond said in a separate statement that NSSA intends to dispose of its 50.09 percent in the company to another insurance group, presumably FML.
“The Board of Directors of NicozDiamond Insurance Limited (“NDIL”) advises shareholders and other stakeholders that it has been informed by its major shareholder of the intention to dispose of its interest in NDIL to another insurance group subject to conditions precedent including regulatory approvals as well as shareholder approval,” said NicozDiamond.
Analysts say the deal implies that NSSA will maintain its control of NicozDiamond indirectly via FML.
NSSA took control of NicozDiamond in November last year, by buying 15.7 percent of the total issued share capital of the company previously held by LAG Malta and belonging to foreign investor Noel Hayes (4.3 percent) and part of the stake held by Bruce Campbell who held just over 10 percent.
It raised the stake to 50.9 percent after eight percent of minority shareholders accepted its mandatory offer made in March this year.
The pension fund has previously said it does not intend to delist NicozDiamond from the local bourse.
But analysts said if the deal goes ahead, FML could offer NicozDiamond minority shareholders its shares in exchange of their NicozDiamond shares and eventually delist the short-term insurer.
They also said that since FML already owns a short-term insurer, Tristar which is a direct rival of NicozDiamond, this calls for competition and Tariff commission to assess the deal. However, Tristar is very small compared to NicozDiamond, and the deal is likely to be approved.
The deal will ultimately depend on NSSA as the major shareholder in the two companies.
NSSA has 70 percent of its investments in the equities market, with interests in 53 of the 60 companies listed on the Zimbabwe Stock Exchange. It holds at least 10 percent shareholding in 12 counters.
NSSA is also among the largest shareholders in RTG, Turnall and ZB Financial Holdings where it owns 36 percent, 32 percent and 38 percent respectively.- The Source