Local firm, Agri Value Chain (AVC), has acquired a 52 percent stake in David Whitehead Textile Ltd (DWTL) for $5,4 million, paving way for the long awaited resuscitation of the fabric maker, sources familiar with the latest development have said.
The eight year-long hunt for investor for DWTL — once Zimbabwe’s largest textile company — directly employing 4 000 people, was sealed last week with AVC becoming the majority shareholder in the former Zimbabwe Stock Exchange blue-chip.
DWTL is under final judicial management under Knowledge Hofisi of Aurifin Capital.
Its creditors are largely constituted by workers who are owed about $8 million.
AVC is fronted by Pradinum Kumar Ganeriwal, also known as “PK” in the business cycles — who is also a major shareholder in Parrogate whose business interests include cotton farming and ginning as well as cooking oil production, in and outside the country.
The shareholding acquired by AVC was previously owned by Elgate Holdings, which lost its 52 percent stake after failing to fully pay for the shares more than a decade after signing a share subscription agreement with David Whitehead.
The agreement was terminated early last month on the basis of “non-performance” by Elgate after the High Court ruled the concession for the purchase of the shares be revoked.
In terms of section 30 of the company’s articles of association, “any shares forfeited shall be deemed to be the property of the company, and the directors, may sell, re-allot or otherwise dispose of the same in such as manner they think fit.”
“The transaction marks the first major step towards reviving the company,” said one source who declined to be named citing confidentiality and protocol issues around the matter.”
“The next major step is to come up with a scheme of arrangement, which entail reviving the company and gradually paying off the creditors.”
Meanwhile, the judicial manager and ACV have signed an agreed that David Whitehead should not be removed from judicial management until all creditors have been paid,” the source revealed.
Hofisi and Ganeriwal both declined to comment when contacted by Business Weekly.
DWTL woes began around 2006 when the company — weighed by operational challenges and saddled by huge debts was first placed under judicial management.
Since then, it remained under the Court-sanctioned reconstruction under three different administrators. Cecil Madondo of Tudor House Consultants was appointed in 2005 and managed the company until 2008.
Two years later, Elgate applied for another judicial management after DWTL plunged into another financial crisis.
Winsley Militala of Petwin Executor and Trust Co, was appointed provisional judicial manager of the company. The sun almost set for DWTL after Militala recommended liquidation of the company, arguing it had failed to secure investors.
In his report, Militala said the judicial management 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 at that time had little funds to lend.
The little funding available was on a short-term basis, which was not aligned to the firm’s trading cycle.
In 2014, DWTL was saved from liquidation after the High Court granted final
judicial management order with Hofisi subsequently being confirmed the final judicial manager.
Production suffered significantly over
the past years due to intermittent operations caused by lack of capital needed to retool
the company’s heavily antiquated
The heavily-indebted company has been struggling with capital, prompting the Reserve Bank of Zimbabwe, through its asset management firm Zimbabwe Asset Management Company to step in with $2 million bailout last year to drive the turnaround.
However, the funds were “too little” to support the turnaround of the company.
Formerly owned by Lonrho plc before a management buyout in 2001, led by former CEO Edwin Chimanye, it has three factories in Chegutu, Kadoma and Gweru.
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.
The Government has been supporting cotton production in the past three years, helping output to increase to 142 000 tonnes last year from 28 000 tonnes.
Analysts say beneficiation, supported by reviving the textile industry will have a multiplier effect on so many dimensions including employment creation.