AN Indian firm has taken over the entire issued share capital of building materials producer and retailer, PG Industries , after shareholders overwhelmingly approved the transaction at an extraordinary general meeting (EGM) last week.
Dewei Investments, which is proposing to inject US$500 000 into the business, is now seeking regulatory consent, including exchange control approvals, to finalise the transaction.
The US$500 000 is expected to help PG return to a positive equity position and guarantee future funding requirements.
The new shareholder will also have to seek exemption from complying with the country’s Indigenisation and Economic Empowerment Act, which only allows foreign shareholders to hold a maximum of 49 percent stake in a Zimbabwean company.
Under revised terms of the law issued by President Robert Mugabe early this year but not yet incorporated into the legislation, government gave foreign investors leeway to negotiate for shareholding higher than the legislated threshold.
PG Industries
In April last year, the High Court sanctioned PG Industries’ scheme of arrangement, which paved way for the de-listed firm to unlock fresh capital to revive its operations, after going through serious problems in the past five years.
PG had a debt of US$21 million and a negative equity position of US$13,1 million at the end of last year, and was in dire need of working capital.
And if shareholders had turned down the transaction, the company faced the threat of liquidation.
A statement issued by the PG board indicated that the Dewei transaction was among several other proposals tabled before shareholders at an EGM last week.
All of them were approved by margins of not less than 97 percent.
Shareholders and creditors approved the “sale by members, to Dewei Investments Limited of their entire 8 640 860 097 share in PG of 0,01 cent each, for a consideration of US$500 000 or US$0,0058 per share. Members waiving their rights of pre-emption to purchase share capital of the company pursuant to the sale of shares by members, to the investor,” said the notice, which was also dispatched to creditors.
The EGM authorised directors “to do all such things as they may consider necessary or desirable to give effect to or pursuant to or in connection with the scheme of arrangement,” added the notice.
The scheme had been opposed by Jones Holdings, which wanted to be regarded as a secured creditor.
The creditor is owed US$600 000 from a 2011 agreement with the firm’s subsidiaries.
In December 2014, PG Industries restructured operations as part of the scheme of arrangement.
It closed three of its branches at the time, leaving its network at 15 from 18.
The decision to reduce its network could have been in response to reduced business in some parts of the country caused by subdued demand for building materials and related products.
The country is going through a liquidity crisis, now entering its third straight year.
It has led to the collapse of many firms, and many workers have been left jobless, resulting in shrinkage in disposable incomes in the economy.
Government, whose spending has largely been directed towards salaries, has failed to support capital projects, resulting in the collapse of construction-focused firms.
PG Industries, which has interests in timber, glass, tiles production and related investments in Zimbabwe, had merged two key units, PG Building Supplies and PG Timbers, into a single operating division after securing the approval of shareholders and creditors under the scheme of arrangement. -Fingaz
