US private equity firm closes in on FBC Holdings

Published: 10 June 2013

UNITED STATES private equity firm Equator Capital is nearing a deal to acquire a 10 percent shareholding in Zimbabwe Stock Exchange-listed financial group, FBC Holdings, sources familiar with the deal have said.

FBCH decided to look for an equity partner ahead of the June deadline in which banks and building societies will be required to have a minimum capital of US$50 million and US$40 million respectively.

This was after a move by the diversified financial services group to sell its 58 percent stake in Turnall Holdings Ltd hit a brick wall. FBCH owns 100 percent in FBC Bank and 60 percent in FBC Building Society.

FBCH chief executive Mr John Mushayavanhu yesterday confirmed the deal, but would not shed more details.

FBCH had expected to realise about US$20 million from the sale of its shareholding in Turnall, which would have been channelled to capitalise its commercial banking division and building society.

Adding pressure on FBCH was the fact that the National Social Security Authority, which has shareholdings in various financial institutions — including FBCH — said it would not capitalise any banking institution in which it had interests, insisting they should merge the operations to meet new capital levels.

NSSA is also a major shareholder in FBC, CBZ Holdings, ZB Holdings and Capital Bank.

Last year, the Reserve Bank of Zimbabwe raised minimum capital thresholds for commercial and merchant banks from US$12,5 million and US$10 million to US$100 million for both sets.

Minimum capital requirements for building societies were also increased from US$10 million to US$80 million, finance and discount houses from US$7,5 million to US$60 million and US$1 million to US$5 million for micro-finance institutions.

These should be fully compliant by June 2014, but were required to meet 25 percent of the new capital levels by the end of last year. They should be 50 percent compliant by June this year.

The financial institutions are further required to be 75 percent and 100 percent compliant by December 31, 2013 and June 30, 2014 respectively.

Sources said FBCH and Equator are negotiating a final deal price and other last-minute details, although no figures could be obtained at the time of going to print. The market value for FBCH is US$47,3 million.

"The Equator deal is almost complete," said one source. "They finished due diligence and the big remaining issue now is on price."

Mr Mushayavanhu said an announcement would be made once the deal had been finalised.

"We are still talking to them and I cannot say much. But we will make an announcement once everything is in place," he said."
FBC Bank's capital levels amounted to US$27,97 million by December 31, 2012, against a US$25 million threshold prescribed by the central bank.

On Monday, FBCH issued a cautionary note advising shareholders that the company was engaged in negotiations which, if successful, would have a material effect on the structure of the group and may have a material impact on the company's business and share price.
- theherald