eBusiness Weekly
Martin Kadzere
Agri Value Chain Zimbabwe (AVCZ), the majority shareholder in David Whitehead (DW), is keen to buy out minority shareholders and take full control of the textile firm.
AVCZ, which recently bought 51 percent in DW for $5,4 million is ready to acquire additional shares from the existing small shareholders willing to cash in on their shareholding, according to a report filed at the High Court by the judicial manager on Tuesday.
“AVCZ is willing to acquire additional shares from the existing members on a willing buyer willing seller basis,” Knowledge Hofisi, the DW judicial manager said in the report, a copy which is in possession of Business Weekly.
“That decision was taken after realisation that the company has more than 900 members (shareholders) whose previous stock market investment was going down the drain.”
David Whitehead, which owns three business units in the towns of Chegutu, Kadoma and Gweru delisted from the Zimbabwe Stock Exchange in 2007. Former chief executive Edwin Chimanye owns 13 percent in DW while other six former executives holds 23,1 percent. DW Employee Trust owns about 7,11 percent.
The executives bought the shares in 2001 in a management buyout after Lohnro Plc divested. Weak shareholder base Hofisi noted that DW had a weak shareholder base, comprising predominantly individuals who lacked capacity to inject meaningful capital into the company.
“For 17 years, the existing shareholders who are principally individuals failed to inject funds into the company,” said Hofisi.
“AVCZ is an institutional investor with proven businesses.”
He said various approaches by potential investors failed to succeed because some could not prove the source of funds, some wanted to buy selected assets while others were driven away by threats of cheap fabric imports, old machinery and legacy debts.
“AVCZ undertook to inject more funds into the company for (settling) legacy debts, to repair and buy (new) machinery.”
Some of the proceeds from the sale of DWTL stake ($5,4 million) was used to pay some of the debts including interest bearing $2 million loan facility procured from the Zimbabwe Asset Management Company, a Reserve Bank of Zimbabwe vehicle. Another $650 000 was paid to a creditor who, in March this year had secured an order to attach 40 immovable properties of David Whitehead in Chegutu. The company will remain under judicial management until debts are settled in full.
DW woes persisted since 2006
DW woes began around 2004 when the company -weighed by operational challenges and saddled with huge debts was first placed under judicial management.
The company used to produce about 20 million metres of fabric per year while directly employing 3 000 workers and thousands in down and upstream industries.
Since then, it remained under the High Court-sanctioned reconstruction under three different administrators. Dr Cecil Madondo of Tudor House Consultancy was appointed in 2004 and presided over the affairs of the company until 2008.
Two years later, Elgate, the new majority shareholder applied for another judicial manager.
Wensley Militala of Petwin Executors, was then appointed the judicial manager of DW.
The sun almost set for DW after Militala recommended liquidation.
He argued that the company had failed to secure investors.
In his report, Militala said the reconstruction was not “serving any purpose” as no investor was prepared to inherit the company’s huge debt. He said access to capital was a “virtual impossibility” as banks had minimal funds to lend. The little funding available was on a short-term basis, which was not aligned to DW trading cycles.
