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Van Hoogstraten escalates CFI dispute

By Shame Makoshori

Outspoken British tycoon, Nicholas van Hoogstraten, has raised concerns over a multi-million dollar deal concluded between CFI Holdings and Fidelity Life Assurance last year and escalated his complaint to the Zimbabwe Stock Exchange (ZSE).

Nicholas Van Hoogstraten
Nicholas Van Hoogstraten

The mogul has pleaded with the stock market to suspend the two companies’ listings, as he seeks to protect his interests and those of minorities.

He has also approached the Securities and Exchange Commission of Zimbabwe (SECZIM) and the Insurance and Pensions Commission, claiming that listing rules and laws were violated when the US$18 million disposal of Langfords Estates to Fidelity sailed through at a CFI extraordinary general meeting (EGM) in October 2015.

Van Hoogstraten controls 35 percent shareholding in CFI through Messina Investments, which holds interests in some of the country’s most recognised companies, including leisure chain, Rainbow Tourism Group and the tri-listed coal producer, Hwange Colliery Company Limited.

Under the Langfords transaction, CFI sold 81 percent shareholding in the 841 hectare sprawling land to Fidelity, which has been on a shopping spree to diversify into the property market in order to escape carnage on its flagship insurance business.

CFI placed its bait on the deal to unlock cash to arrest a funding gap precipitated by lack of capital.

The former bellwether stock has been teetering on the verge of insolvency and has sought to embark on a cash call which shareholders have snubbed since 2009 when the country switched to a multi-currency system following a disastrous hyperinflationary crisis which ended in 2008.

Two weeks ago, the Financial Gazette’s Companies & Markets (C&M)reported that van Hoogstraten had initiated moves to reverse the transaction.

He claims that there was conflict of interest in the transaction after Zimre, which holds shareholding in both Fidelity and CFI, voted at the EGM.

He said another key shareholder in CFI, the National Social Security Authority (NSSA), was also in conflict of interest when it cast its vote at the EGM.

Now, as discussions to find a solution to the dispute continued, the shareholder activist is understood to have approached the three regulators on November 1, asking them to suspend trade on CFI and Fidelity shares.

Van Hoogstraten declined to disclose why he had taken the radical route when approached by C&M.

But an analyst said it was possible that the tycoon wanted to make sure stocks under dispute were not transferred to other investors through the open market while the standoff was unresolved.

His discussions would mostly be with the Rudland brothers, who swooped CFI shares through the takeover of Zimre Holdings last year.

The Rudlands, famous for building the logistics firm, Pioneer Corporation Africa into one of the biggest sector players with the takeover by Unifreight last year, are understood to be edgy about the developments.

But the tycoon, feeling prejudiced by the transaction that he had blocked at an annual general meeting in May last year, is said to be determined to retake one of the most priced estates on the fringes of Harare.

Messina said the violations were serious.

“We write to advise you of the illegal transaction between the two above ZSE listed companies that took place in October of last year,” Messina said.

“We attach copies of our correspondence of 29th July and 9th September to Messrs. Honey & Blanckenberg and their replies of 1st August and 3rd October. Obviously, this breach of the law and ZSE regulations is a very serious matter and the amount of prejudice to the non Zimre and NSSA shareholders is substantial.

“We would suggest that, at the very least, while this matter is being resolved via litigation or otherwise, the listing of both companies should be suspended and your own office should carry out their own investigation as to how this transaction managed to circumvent the law and regulations,” said Messina.

The letter to Fidelity said: “We propose to take the necessary legal action to have this transaction reversed and put properly to a resolution of the non conflicted shareholders in a modified form.” Messina says CFI legal representatives, Honey & Blanckenberg, were liable for the damages that Messina and other shareholders have suffered.

But the lawyers denied liability.

“We dispute that we are liable for damages to you or any other shareholder,” they said in a letter to Messina dated October 31, 2016.

“As previously set out, the advice we gave to CFI was in regard to issues relating to the EGM. We are not, however, at liberty to discuss such advice owing to attorney-client privilege and attorney and client confidentiality. Furthermore, we have not received any further instructions from CFI in respect of this matter, and consider our mandate to have been completed,” added the lawyers.

SECZIM confirmed receiving the letter this week. Chief executive officer (CEO), Tafadzwa Chinamo, said investigations had kicked off to determine if listing rules had indeed been violated. The SECZIM boss said appropriate action would be taken once investigations are completed.

“The commission is investigating the said transaction. In that regard, we have written to the ZSE to look into the matter and respond to the issues raised. Once the investigations have been completed appropriate action will be taken. Determining whether ZSE listing rules or indeed any other rules were violated is the objective of the investigations we have instituted. The findings will also show whether the transaction prejudiced certain shareholders as alleged. The decision to suspend a listing is governed by the ZSE listing rules which are enforced primarily by the ZSE itself. The findings of the investigation will also guide the course of action that will be taken. As it stands all hinges on the outcome of our investigations,” said Chinamo.

In hard-hitting letters to Honey & Blanckenberg dispatched on October 16, 2016 and previously reported by C&M, Messina director, Maxmillan Hamilton, said there had been serious violations of CFI’s Memorandum and Articles of Association when the “fraudulent” transaction was given the green-light.

Hamilton is son to van Hoogstraten. There was no full disclosure to ZSE, on which Fidelity, Zimre and CFI are listed, when the deal was sealed, Messina argued.

In May, CFI CEO, Stephen Kuipa, left the firm as the group, which had been hit by shareholder wrangling, also announced the immediate departure of chairman, Simplicius Chihambakwe.

Finance director, Acquiline Chinamo, also left last year.

NicozDiamond Insurance managing director, Grace Muradzikwa, was appointed acting chairperson. Timothy Nyika and Shingirai Chibhanguza took over as acting group CEO and deputy CEO respectively. Financial Gazette

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