Minority shareholders, amongst them, directors of the pan-African banking group, ABC Holdings (ABCH) have reportedly resolved to avoid a squeeze out of their company by the majority shareholder, ADC Financial Services by refusing to accept a mandatory buyout offer made recently.
The decision, although not made public yet, was reached after it emerged that the current valuation of BancABC was too low and would likely prejudice minority shareholders registered in both Botswana and Zimbabwe.
In terms of the Botswana Stock Exchange’s listing requirements, where ABCH trades its stock, “if any person including an existing shareholder acquires 35 percent or more of the ordinary issued shares of a listed company, that person is obliged to make an offer to the rest of the other “minority” shareholders at the same price that they have accumulated the 35 percent stake”.
A very influential circular from the BancABC directors targeted at minority shareholders read, “The substance of the opinion and the views of the independent panel of the ABCH Board are that the terms and conditions of the Mandatory Offer are fair, but not reasonable to ABCH shareholders and, consequently it is not recommended that ABCH shareholders accept the Mandatory Offer”.
The director’s recommendation follows that of an independent expert, Imara Botswana Limited which was requested an opinion on the fairness and reasonableness of the mandatory offer.
ADC Financial Services, a German listed, emerging pan-African banking group which is also a major shareholder of ABCH notified other shareholders of its intentions to buy them out at an issue price of US$0.60 per share and at the exchange rate equivalent of P5.05 on the local bourse, the Botswana Stock Exchange (BSE).
“This is the same price at which ADC increased its effective shareholding in ABCH to over 50 percent following the successful US$50 million rights issue, undertaken by the bank last year”, a source close to the company observed this week.
Last year in July, BancABC floated a rights offer, which was fully subscribed. The offer saw major changes within the shareholder base which resulted in ADC taking a direct shareholding of 41.7 percent of ABCH’s total issued shares.
Sunday Standard has been reliably informed that ADC later agreed to warehouse an additional 8.7 percent of shares as a financing mechanism for the executive management team. As a result its effective shareholding went to 50.4 percent.
To see through the rights offer, ABCH had secured a special dispensation granted by the Botswana Stock Exchange (BSE) which allowed ADC to increase its shareholding as a result of the underwriting deal.
Sunday Standard has further been informed that ADC, which was already a significant shareholder of ABC Holdings with 23.4 percent stake, was granted the preliminary waiver of the Botswana Stock Exchange (BSE) requirement to make a mandatory offer to minority shareholders in the event that its shareholding increased to 35 percent or more as a result of the underwriting transaction.
Efforts to obtain a comment from ADC Chief Executive, Dirk Harbecke hit a snag by the time of going to press. However he had previously outlined ADC’s vision of strengthening its existing banking operations as well as expansion into further attractive banking markets.