In what has been a bit of a roller-coaster, the Zimbabwe Stock Exchange (ZSE) Industrial index shed 1.36% yesterday mainly due to Econet’s losses. Since the transition of power from Mugabe to President Mnangagwa the ZSE market capitalisation has been seesawing around the $9 and $10 billion range.
On Tuesday the 19th of December the Industrial index eased 1.36% as mentioned above while the Mining index fell 0.05%. Econet Wireless, shedding 10.64% and NicozDiamond easing 17.29% led the losers on the Industrial Index whilst Bindura Nickel were the only loser on the Mining Index, easing 0.18%.
Foreigners were net buyers in the day, disposing shares worth $40,726 compared to purchases worth $56,130.
NicozDiamond is the largest short term insurer in the country. It’s trade volumes have been very high especially since First Mutual Holdings (FML) got regulatory nod to acquire the company. This acquisition was initiated months ago and will include various transactions which will lead to NicozDiamond becoming an FML subsidiary.
NSSA, which is the major shareholder in both FML and NicozDiamond will give up it’s shareholding in NicozDiamond in exchange for FML shares. NSSA also irrevocably undertook to acquire 30.03% of Nicoz’s shareholding currently held by Zimre Holdings to add on to the 50.89% it is giving up.
Upon completion of the transactions FML will hold a controlling 80.92% of NicozDiamond’s shareholding. The regulatory approval that FML got allows it to proceed with the transactions. Once FML acquires the 80.92% they are obligated by the ZSE to offer to buy out the remaining 19.08%.
So those minority shareholders may actually get a sweet deal when FML acquires those shares. That explains why there has been so much traffic on the NicozDiamond counter. On the day FML announced that they had gotten regulatory approval well over 300m shares worth over $6.5m were traded. Speculators foresee FML offering to buy out the minority shareholders at a premium.
You will have noticed however that Nicoz actually eased quite a margin yesterday. One of the reasons could be that Zimre recently said it no longer wished to sell off it’s 30.03% stake in NicozDiamond to NSSA. Some see this as just a move to get a better deal in terms of premium offered on their shares.
Some fear this could complicate the deal which would see it drag on for months or even years. Some fear it could actually see the whole deal cancelled. Whatever the case, the effect is the abnormal trade in NicozDiamond shares. Yesterday, shares worth over $7m were traded despite the share price falling.