The Sunday Mail
BIDS for potential suitors of a controlling stake in food and beverage group Cairns Holdings Limited that used to be held by the Reserve Bank of Zimbabwe (RBZ) through its investment arm, the Finance Trust of Zimbabwe (FTZ), have been re-opened as the proposed takeover by South Africa firm Vasari Global has collapsed.
Vasari was announced as the winning bidder of a 67 percent stake held by FTZ in 2013, but since then it has failed to pay the money needed for the stake.
Other potential suitors for the stake included Dairibord, Judah Holdings and another South African-based firm, Eastern Trading Company Limited.
There was also a consortium of Russian investors led by tycoon Mr Nikolay Varenko that was prepared to swoop on the business.
Although the quantum of the funds that Vasari Group was expected to inject could not be ascertained last week, market rumours suggested that any new investor into Cairns Holdings was supposed to shell out between US$20 million and US$30 million.
Currently, Cairns owes creditors and lenders US$20 million and US$11 million respectively.
The firm’s judicial manager, Mr Reggie Saruchera of Grant Thornton Camelsa, confirmed last week that the deal had fallen through, adding that alternative options are presently being pursued.
“With regards to finding an investor, we are in negotiations with other interested parties. This is after Vasari was unable to commit to the transaction within the agreed stipulated timeframe.
“We will continue to run the business while we finalise with an investor,” said Mr Saruchera.
Mr Saruchera said despite the challenges in the economy and lack of capital to support production and recapitalise, Cairns has turned around its fortunes and managed a profit despite the operating environment.
“The group continues to operate profitably given a difficult trading environment.
“We are currently disbursing a dividend of US$400 000 to pre-judicial management creditors.
“In addition, we are in the process of acquiring items of plant and equipment to enhance our production capacity,” said Mr Saruchera.
Cairns is a fast-moving consumer goods manufacturer with particular interest in vegetables, snacks, chips, groceries and beverages.
The brands are household names in Zimbabwe.
Encouragingly, the company last year reported turnover and profit of US$22,1 million and US$2,2 million for the judicial management period to March 31, 2014.
Cairns managed to access about US$1 million under the Distressed Industries and Marginalised Areas Fund (DIMAF) – a facility established by the Government to assist struggling firms – to buy equipment for the snack and canning business.
Information gathered by The Sunday Mail Business show that last year, Vasari tried to re-negotiate a number of issues with major creditors, which, naturally, was met with stiff resistance.
It is believed that the options that are now available for the judicial manager are a debt-to-equity swap and the re-scheduling of major loans.
Cairns applied for voluntary judicial management in 2012 after coming under severe challenges due to lack of capital, which resulted in drastic drop in capacity utilisation to levels around 10 percent.
The company enjoys near monopoly in the corn-based snacks market but is currently facing intense competition in other areas such as canning, which is where new equipment is needed the most.
Capacity utilisation, which had plummeted at the foods manufacturer, is now ranging between 20 and 30 percent.
According to the Master of the High Court’s roll, scores of companies are each month applying for judicial management, liquidation and voluntary closure as provided for by the Companies Act.
The Act provides that a company may be placed under judicial management if it is unable to clear its debts or when it is likely to collapse.
Big industrial companies such as Gulliver and Steelnet have since closed shop due to unsustainable debts and a lack of funding.
Many others including David Whitehead, Road Motor Services, Belmont Leather, National Blankets and Gutsai have had a taste of judicial management.
Capacity utilisation in Zimbabwe’s manufacturing sector has plunged to 36 percent recorded last year amid warnings by industry that a fresh crisis triggered by capital constraints was looming.
Official statistics show that nearly 75 percent of local manufacturing companies need new equipment and technology to operate efficiently. Faced with stiff competition, the share of manufacturing output exported has fallen dramatically, further widening the country’s trade deficit.
According to the World Bank, more than 25 percent of the firms were exporters during the 1990s compared to less than 10 percent now. In 2011, the RBZ took a position to divest from non-core activities.
The divestment included the disposal of a 58,7 percent in Tractive Power, 70 percent in Thuli Coal and 50 percent in Transload, including Astra.
