CBZ, FMHL deal to create much-needed critical mass

CBZ Holdings shareholding in First Mutual Holdings (FMHL) is now at 36 percent and the company believes the acquisition thrust is to merge the two operations to achieve scale to compete against larger corporations in Zimbabwe and in the region.

The transaction in which CBZ acquired additional shares from NSSA, constituting 31.22 percent of the issued ordinary shares of FMHL, took CBZH’s total shareholding to approximately 34.45 percent.

The total purchase consideration for this transaction was agreed at $6,355,922,132, a price of $28 per FMHL ordinary share excluding transaction costs.

Blessing Mudavanhu, the CBZH chief executive, told the media on Wednesday that diversifying into insurance will ensure the group’s bank assurance model is effective because it has the backing of a strong insurance company.

“We are also diversifying our geographical presence. FMHL has exposure to Mozambique, Botswana, and Malawi, so that is also part of the overall strategy,” he said.

Mudavanhu said the synergy with FMHL will result in the creation of a strong balance sheet that will have the capacity to attract foreign investors in order to finance huge projects.

He said infrastructure requires huge funding and as such, all the banks in Zimbabwe combined will not be able to pool a large-scale infrastructure product for initiatives such as roads and bridges.

“In part, we don’t have that balance sheet, but once you have a local balance sheet, you have to attract foreign players.

“In addition, all bank capital combined is significantly lower than the country’s GDP, so this transaction we are embarking on will be key for future investments,” he said.

FMHL chief executive, Douglas Hoto, said the synergies from NSSA and CBZ mean there is going to be one management structure that will come with cost savings.

“When you put together two companies, expect better expense ratios and a reduced cost of doing business,” he said.

Hoto added that the transaction will also take advantage of the distribution capabilities of the bank and the insurance company together and the product cost-selling.

“When one puts more money in the bank to start projects, whether to start construction or not, all those need insurance, and we will see the value along the way,” he said.

Hoto said the transaction was largely informed by the need for Zimbabwe to have a financial institution that is consistent with national interests and the national development agenda.

“When FMHL was chosen to lead the insurance cluster consolidation and combine with a strong bank, we wanted to create capacity to finance and secure investors for projects.

“We believe that the transaction is the beginning of a journey, and we will grow. The insurance business is to mobilise funds,” he said.

He added that the group is looking at a new Zimbabwe with a different economic ethos. “We are doing this deal mindful of the informal sector, where we can build less structured economic possibilities in Zimbabwe to convert them into a new vision that is inclusive and creates an upper middle-class economy,” said Hoto.

According to Mudavanhu, the FMHL business model presents a natural fit between FMHL and CBZHL as it brings to the group a giant leap into the insurance space.

He added that FMHL has regional operations in the SADC region and these operations will give CBZH subsidiaries a steppingstone for expansion into the region.

“This transaction offers diversity and synergistic opportunities among the operational units of our two businesses. The exploitation of synergies between these two businesses should unlock more value for the combined entity, looking to enhance its insurance and property businesses further and widen its product offering to its significant client base.

Combining these with the advantages of the largest bank in the country will present a well-oiled bancassurance model to the Zimbabwe market,” he said.

According to Mudavanhu, these businesses combined will expand the trading abilities of both entities across geographies, thereby permitting the extension of product management and distribution capabilities, improving customer product offerings and better absorbing market shocks through a deeper and further diversified capital base.

“We believe this transaction will add significant shareholder value to both entities but, more importantly, to our country, as we will ensure the economic mass acquired will be used to underwrite larger transactions in the country,” he said.

He added that the group’s clients will be the greatest beneficiaries of this newly acquired size because they will have access to a wider range of products and services, as well as enhanced support and expertise.

NSSA acting general manager, Dr Charles Shava, said the transaction marks the culmination of a journey that started in 2020 when NSSA embarked on an investment refocus strategy that involved consolidation and optimisation of our investments to unlock value for the benefit of our members.

He said NSSA, as the social security organisation, currently has investments coming from two schemes, which are the pensions and other benefits scheme and the accident prevention and workmanship compensation schemes.

He added that in pursuit of this objective, NSSA adopted a phased approach, in which phase 1 involved the consolidation of the short-term insurance, NicozDiamond, into FMHL through the disposal of the authority’s stake in NicozDiamond in return for FMHL shares.

“The transaction helped to strengthen FMHL’s short-term insurance business, solidified its market standing as one of the leading short-term insurance companies in the country, and also strengthened our investment in the insurance industry,” he said.

Dr Shava noted the CBZ transaction leaves NSSA as the largest player in the stock market as well as both in CBZ and FMHL because it is going to remain the single biggest shareholder in FMHL as well as CBZ.-ebusinssweekly