First Mutual Holdings Limited has announced plans to raise $439,2 million (BWP61 million/US$5,3 million) by selling a 29,1 percent stake in its 100 percent owned subsidiary, First Mutual Reinsurance Holdings (Proprietary) Limited (“FMRE HoldCo”).
FMRE HoldCo, which will be domiciled in Botswana, is the holding company for First Mutual Reinsurance Company Limited (“FMRE Zimbabwe”) and FMRE Property & Casualty (Proprietary) Limited (“FMRE Botswana”).
The 29,1 percent stake will be sold to Botswana private equity firm Aleyo Capital (Proprietary) Limited (“Aleyo”), whose principal investors are Botswana-based pension funds and institutional investors.
The subscription amount is to be used to capitalise the ubsidiaries to enhance their security profile.
“To that effect, a binding agreement has been signed, subject to conditions precedent listed below,” reads a circular to First Mutual Holdings shareholders who will be required to vote on the transaction at an Extraordinary General Meeting to be held virtually by electronic means on the 5th of October 2020.
According to the circular, the capital raised will be utilized to capitalise FMRE Zimbabwe and FMRE Botswana in order to provide
the businesses with adequate working capital to their enhance reinsurance capabilities, and to further boost the subsidiaries’ solvency, liquidity and other technical considerations to support expansion.
“If the transaction is not executed First Mutual’s reinsurance businesses will remain sub-optimally capitalised and won’t be able to take advantage of the opportunities in the reinsurance space,” reads part of the circular.
The transaction is however subject to approval by First Mutual Holdings’ shareholders, as well as regulators including the Reserve Bank of Zimbabwe, Competition and Tariff Commission, and Non-Bank Financial Institutions Regulatory Authority of Botswana (“NBFIRA”) and the Insurance and Pensions Commission of Zimbabwe (“IPEC”) among others.