Rudland brothers eye CFI
THE Rudland brothers, who recently seized control of Zimre Holdings Limited, are angling for control of diversified agro-dealer, CFI Holdings Limited, and are understood to have committed to underwrite a planned US$20 million rights issue, the Financial Gazette’s Companies & Markets (C&M) has learnt.
The Rudland brothers — Simon and Humish — took over a 40 percent stake in Zimre Holdings to emerge as the single largest shareholder in the group, which has an interest in CFI.
Speculation has been swirling that the brothers, who also have controlling interest in Unifreight, were more interested in the CFI Holdings when they swooped on Zimre through an undersubscribed rights issue early this year. The Rudland, through NMBZ Bank, underwrote the rights issue.
Now, they are understood to be within the cusp of underwriting a CFI rights issue expected to be sanctioned at an extra-ordinary general meeting (EGM) of shareholders at a date yet to be announced.
Nicholas van Hoogstraten, the second largest shareholder in CFI Holdings, is said to be uninterested in supporting the planned rights issue, a situation that could result in the Rudland taking over a significant chunk of shareholding in the expected event that the rights issue is undersubscribed.
Van Hoogstraten did not respond to questions sent to his e-mail, but a source close to the British tycoon said he was unlikely to support the rights issue.
“He is not prepared to agree on anything that hehas not seen,” said the source, who indicated that the British mogul was not represented at last week’s annual general meeting (AGM).
Van Hoogstraten, through his investment vehicles, controls about 23 percent shareholding in CFI.
Despite clear evidence the company is crumbling under the weight of under-capitalisation and high gearing, CFI Holdings chief executive officer, Steve Kuipa, vowed last week to steer the troubled group to profit by 2016.
“Performance across the units remains subdued because our businesses are starved of capital,” Kuipa told shareholders at the AGM in Harare that had been rescheduled after the original meeting in June was blocked by van Hoogstraten.
“All our businesses are starved of capital,” said Kuipa.
“These businesses will require a capital raise because since dollarisation, we have not re-capitalised. The most important issue is to seek shareholder approval on the rights issue; we will be coming back to you by way of an EGM,” he said.
He did not give figures, but C&M is reliably informed that the group’s full-year financial standing could end next month worse than the previous year.
CFI’s post-tax profits retreated by US$3,3 million to US$9,9 million during the full-year to September 30, 2014, from US$6,6 million during the prior comparative period.
Turnover slipped 18 percent to US$71,1 million, from US$87,2 million in 2013.
Kuipa, who was expected to come under a barrage of shareholder criticism, was in a relaxed mood in the comfort of the Royal Harare Golf Club in Harare.
It was at the same venue in June that the AGM was blocked in dramatic developments that left shareholders shocked, and pondering over the powerful Briton’s next move.
High debts which have resulted in mounting interest rates, draining US$320 000 per month out of CFI, have partnered with undercapitalization to prolong losses at the group.
And the CFI boss said he would be approaching shareholders to approve a US$20 million rights issue in the coming days, as part of wide ranging measures under consideration to forestall the businesses collapse.
The capital raising programme is seen as key to giving the group more relief after insurance group, Fidelity Life Limited, took over debts owed to local banks in a deal that Kuipa said had already given him and his executive fresh impetus to decisively reposition CFI.
CFI’s year ends on September 30 and the company is expected to present its financial statements for the year between October and December 2015.
That CFI has been forking out US$320 000 in interests now explains why the firm has been slowly swinging towards insolvency.
He assured shareholders that the future was bright.
“Fidelity has negotiated for debt assumption…this should make CFI attractive to investors to raise capital. The board has recommended that we raise US$20 million. The conclusion of the rights issue will be in time for our new year. The group should return to profitability in 2016,” said Kuipa.The overwhelming approval of a range of proposals tabled before shareholders last week, including the assumption of board seats by van Hoogstraten and ZIMRE Holdings representative, opened a fresh page for CFI, which had been paralysed by shareholder dogfights prior to last week.
In June, van Hoogstraten told C&M he was initiating moves to force the troubled firm into judicial management. His moves were aimed at arresting a serious diminution of shareholder value at the troubled group that has made a cumulative US$16 million in post-tax loses between 2013 and 2014.
CFI’s going concern was under threat and its operations were undermined by high gearing and a biting working capital crisis, according to the diversified agricultural group’s 2014 annual report.
In a dramatic display of corporate clout, van Hoogstraten demanded that pre-requisite notices and announcements be made according to Zimbabwe Stock Exchange listing requirements before any AGM.
As the British tycoon left fellow shareholders and directors shocked by his moves that bright winter morning, his focus shifted to scrutinising the group’s debt soaked balance sheet, which was already showing signs of extensive distress.