19th Aug 2010 08:00
Not for distribution, directly or indirectly, in whole or in part in or into the United States, Canada, Australia, Japan, the Republic of Ireland or South Africa or to US persons.
This announcement is not an admission document. This document does not constitute or form part of, and should not be construed as, any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares or warrants in the Company or securities in any other entity nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract or investment decision in relation thereto. This document does not constitute a recommendation regarding any securities.
Any investment decision must be made exclusively on the basis of the final admission document published by the Company and any supplement thereto (the 'Admission Document'). Any defined terms used in this announcement shall have the same meaning as defined in the Admission Document, unless otherwise defined herein. Copies of the Admission Document will be available on the Company website www.masawara.com
Masawara PLC
("Masawara" or the "Company")
Admission to trading on AIM
Admission
Masawara PLC (AIM:MASA) is pleased to announce the commencement of dealings in its ordinary shares of US$0.01 ("Ordinary Shares") on the Alternative Investment Market of the London Stock Exchange following the issue of 30,957,863 million shares at 50 pence per Ordinary Share via a successful placing by Cenkos Securities plc.
Highlights
§ Initial market capitalisation of US$80 million at the Placing Price and US$25 million new funds raised
§ The Company intends to pursue high quality new investment opportunities in Zimbabwe, adding to an existing portfolio of Zimbabwean assets, to participate in the recovery of Zimbabwe's economy. The directors believe that the growth of Zimbabwe's economy over the medium term will accelerate as the momentum of the political stability gathers pace
§ The initial portfolio comprises an effective 40 per cent. interest in Joina City, the single largest commercial and retail building in Harare, and a 30 per cent. interest in TA Holdings Limited ("TA Holdings"), a diversified investment company that holds stakes in insurance, agro-chemical and hospitality businesses across sub-Saharan Africa and is listed on the Zimbabwe Stock Exchange
§ Masawara's investment adviser is FMI Zimbabwe, a wholly owned subsidiary of the Company, which will be responsible for identifying opportunities and managing investments in Zimbabwe and the wider Africa. FMI Zimbabwe is led by Shingai Mutasa and fellow principal Julian Vezey who have numerous relationships in Zimbabwe and surrounding territories. Both Mr. Mutasa and Mr. Vezey will hold non executive director positions on the board of Masawara and have previous experience in investing in Zimbabwe
Commenting on the Admission, Shingai Mutasa, non executive director of Masawara, said: "We have a great opportunity to lead the pack in bringing much needed investment capital to Zimbabwe and help the country rebuild following its recent economic difficulties. Masawara offers investors a high quality portfolio of new and existing investment opportunities which we are confident will deliver significant value."
For more information contact:
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Pelham Bell Pottinger David Rydell/Olly Scott
Cenkos Securities plc (Nominated adviser and broker) Max Hartley/Elizabeth Bowman
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+44 20 7861 3232
+44 20 7397 8900
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The following is an excerpt from the Company's admission document.
Information on the Group
The Company
Masawara was incorporated in Jersey on 28 June 2010 for the purpose of acquiring interests primarily
in Zimbabwe-based companies and projects in sectors such as agriculture, mining, telecommunications and real estate, which the Directors believe represent investments that will generate attractive shareholder returns. The Directors believe that Zimbabwe currently presents an attractive investment opportunity following the stabilisation of the economy after dollarisation in February 2009, and that Masawara will be well placed to take advantage of current depressed valuations as Zimbabwean companies look for capital to fund growth.
On Admission, the Company will acquire 100% of the issued share capital of FMI Zimbabwe (through an intermediate holding company, Masawara Mauritius). Accordingly, the Group's investment portfolio on Admission will comprise an effective 40% holding in a high profile commercial property in central Harare, Joina City, and a 30% interest in TA Holdings, an established Zimbabwean investment company listed on the Zimbabwean Stock Exchange. Shingai Mutasa is currently the executive chairman of TA Holdings, although he will move to a non-executive role by the end of 2010.
The Company plans to acquire non-controlling interests with board influence in investee companies
primarily in Zimbabwe, although investments in neighbouring countries will also be considered. Subject to the AIM Rules for Companies limiting the Company, as an investment company, from undertaking trading activities, Masawara may also take controlling interests in some of its investments (including TA Holdings) should the Directors determine that this investment strategy will generate more value to investors. The Company will seek long-term capital growth through the acquisition of interests across a range of sectors and will be advised by FMI Zimbabwe, its wholly owned subsidiary.
The Placing is expected to raise $24.6 million (£15.5 million). Masawara intends to invest the net proceeds of the Placing within 18 months of Admission. Masawara expects to raise further funds in the short term following Admission to invest in accordance with its investment strategy.
Investments by the Group
The Directors believe that Southern Africa, and Zimbabwe in particular, currently offers investors access to investments at attractive valuations, which will provide Shareholders with long-term capital appreciation. On Admission, the Group will hold two significant investments:
§ a 30% shareholding in TA Holdings, a Zimbabwean investment company listed on the Zimbabwe Stock Exchange with strategic and portfolio investments in sub-Saharan Africa focussing on the insurance, agro-chemical and hospitality industries; and
§ a 40% effective interest in Joina City, which is held pursuant to a co-ownership arrangement between Dubury Investments and Cherryfield Investments, the single largest commercial and retail building in Harare, Zimbabwe, with a total gross area of approximately 64,000 square metres with lettable space of approximately 26,851 square metres.
These investments provide the Group with a portfolio of existing assets on Admission which have significant potential in a recovering and growing Zimbabwe. The Company's investment strategy is opportunistic, and the Board has identified a number of high growth sectors within the Zimbabwe economy. The Investment Adviser has expertise in identifying investment opportunities in Zimbabwe.
Investment Rationale
The fundamental investment rationale for the Company is to participate in a recovery in the Zimbabwe economy, which the Directors believe to be in its early stages, with significant potential returns expected in the next five years. The Directors believe that the growth of the Zimbabwean economy over the medium term will accelerate as the momentum of expected political change gathers pace. The Company will seek, through its existing portfolio and new investments, to secure long term capital growth for Shareholders by investing in high growth businesses and sectors of the Zimbabwe economy during this growth phase.
Mr Mutasa and Mr Vezey, directors of the Company, together have over 50 years' combined business experience in investing in Zimbabwe and will be responsible for identifying and managing, in accordance with the decisions of the Directors, the investments of the Company in their capacity as the executive directors of the Investment Adviser.
Investment Opportunities
Existing Zimbabwean businesses
The Directors believe that opportunities exist to provide capital and management expertise to existing businesses in Zimbabwe. Given the shortage of capital in the country and concerns over the regulatory framework in Zimbabwe (specifically on the part of foreign investors as a result of the IEE Act and Regulations), the Directors believe that there are a limited number of investors active in Zimbabwe at present and, as a result, Masawara should be able to source investments at attractive valuations.
The Company qualifies as an indigenous Zimbabwean for the purposes of the IEE Act and is not currently restricted from acquiring majority control of any Zimbabwean company or business. Whilst the Directors believe that the indigenisation legislation is unlikely to be sustainable in the medium to long-term and will be modified to attract investment to Zimbabwe, foreign investors are currently limited in their ability to capitalise on the investment opportunities in Zimbabwe. Investments may be made by the Group in listed or unlisted companies, including divestments by international companies.
Mining
Zimbabwe is rich in natural resources and investment opportunities exist on two levels:
§ the recapitalisation of existing mining operations which have been inoperative due to a lack of investment; and
§ start-up opportunities that can be funded to a feasibility stage prior to partnering established mining houses in production.
Agriculture
While still subject to uncertainty and political influence, the Zimbabwean Government has indicated that it wishes to lease out state land and agricultural estates vested with state institutions, particularly the Agricultural Research and Development Agency ("ARDA"), to private enterprise. Although rehabilitation will be required, the assets are significant both in size and potential.
Telecommunications
There has been minimal economic and technological development in Zimbabwe over the last decade.
Consequently, the Directors believe Zimbabwe requires significant investment in new technologies, particularly in the telecommunications industry. The Directors believe that this offers the Group the opportunity to partner with businesses that are entering the Zimbabwean market to roll out new technologies. The Directors anticipate that there will be a rapid rate of technological development as the economy recovers.
Property
The Group will assess opportunities in the real estate sector and Joina City is a promising investment currently in the portfolio. Where the Directors consider that valuations are particularly attractive and/or development opportunities exist, the Company may pursue such opportunities.
Privatisations
The Directors believe that the Zimbabwean Government will privatise a number of assets in the medium term. The Zimbabwean Government owns a broad range of holdings in businesses in Zimbabwe both in traditional government sectors such as telecoms, agriculture and power generation and distribution, as well as in commercial sectors such as banking, food manufacturing and distribution and mining.
Investment Policy and Strategy
Investing strategy
The Company has adopted the following investment strategy:
Dislocation of value
In the identification of investment opportunities, emphasis will be placed by the Company on
identifying value propositions, with a view to finding, unlocking and extracting embedded real value.
Return
The Group will target investments that it considers, at the time of investment, are likely to generate a
minimum project IRR of 25%.
Business preference
The investment criteria to be adopted are:
§ emphasis on investment in cash generative businesses;
§ ability to influence the business at a board level, with the Group's and/or the Investment Adviser's
executives adding structuring and financing expertise to the management of the business, as well
as significant industry relationships and access to finance;
§ ability to work alongside a strong management team to maximise returns through revenue growth,
accretive acquisitions, and the optimisation of cost control and customer issues;
§ investing in businesses with a clear growth potential; and
§ focus on the creation of intrinsic value through the restructuring of the investment or a merger with complementary businesses.
Risk
The Group will seek to establish an appropriate risk adjusted point of entry into a capital structure.
The Company may choose:
§ to invest in equity in order to allow management partnerships and participation in a position of
influence usually through board representation; and/or
§ to invest in convertible debt and/or quasi-equity to the extent that this will reduce return risks
associated with specific projects or businesses.
Prior to any investment, consideration will be given to understanding and minimising the impact of those risks that cannot be hedged.
Investment portfolio
The Company will continuously assess its portfolio of investments in the light of further opportunities and the mix of investments.
Exit
The Board will monitor each investment and at the appropriate time seek to realise value from investments through a partial or full exit, most likely through a trade sale or listing on an appropriate stock exchange.
Investing policy and restrictions
The Company will adopt the following policies and restrictions:
Geographical focus
The Group proposes to invest the net proceeds of the Placing in businesses or in assets located primarily in Zimbabwe. To the extent that the Directors consider that value opportunities exist and attractive returns can be achieved, investments will also be considered in the Southern African region.
Type of investment
The Group proposes to invest in equity, quasi-equity or debt instruments that may or may not provide shareholding or management control. Investments may be made directly, through special purpose vehicles or trust structures, or through joint venture arrangements with a third party.
Investment size
Whilst there are no restrictions on investment size, all investments will be subject to Board approval. In compliance with the AIM Rules, the Group will not undertake an acquisition if it would constitute a reverse takeover or would result in the Company becoming a trading company, without obtaining prior shareholder approval.
Investment timeline
The Company expects to invest the net proceeds of the Placing within 18 months of Admission.
Number of investments
Once the net proceeds of the Placing are fully invested, the Company anticipates managing a portfolio of no more than 5 investments, excluding any short term money market investments.
Borrowings
The Group may use overdraft and short term borrowing facilities to satisfy short term working capital needs, including meeting any expenses or fees payable by the Group. The Company anticipates that borrowings may be utilised for investment purposes, with the prior approval of the Board. The Company's memorandum of association and the Articles do not contain any limitations on the authority of the Company to borrow.
Cash management
Subject to any Zimbabwe exchange control requirement, cash will be placed in bank deposits, investment grade commercial paper, government and corporate bonds and treasury bills.
Policy review
The Directors will review the investment policy of the Company on an annual basis and, in the absence of any unforeseen circumstances, it is not envisaged that the investment policy will be varied for at least three years following Admission. Any future changes to the Company's investment policy would require Shareholder consent by an ordinary resolution.
Periodic disclosure of NAV
The NAV per Ordinary Share will be calculated by the Investment Adviser and will be published by the Company semi-annually in conjunction with the interim and final results of the Company. The NAV per Ordinary Share will be calculated using the IFRS principles. The NAV per Ordinary Share will be published through a regulatory information service provider to the London Stock Exchange as soon as practicable after the end of the relevant period. It is expected that the first NAV per Ordinary Share following Admission will be calculated as at 30 June 2010.
Investment approval and management process
Set out below is a summary of the investment approval and management process that will be generally applied by the Company (to the extent appropriate given the nature of a relevant investment opportunity):
Initial analysis
The Investment Adviser will conduct an initial high-level review of potential investment opportunities. The high-level review will involve:
§ an analysis of the strength and reputation of the business;
§ consideration of the reason for sale;
§ a site visit (where appropriate);
§ a review of the financials;
§ identifying and evaluating the key performance indicators;
§ an assessment of appropriate gearing levels and financing costs;
§ a desktop valuation; and
§ a cashflow/IRR analysis.
The Investment Adviser will prepare an acquisition report proposal which will be distributed to the Board for discussion and (if deemed appropriate) approval. A full review of the results will be undertaken by the Board to determine whether the investment opportunity presents sufficiently attractive characteristics. Following approval from the Board, a formal offer may be made to the seller and terms finalised. Shingai Mutasa and Julian Vezey, who are executive directors of the Investment Adviser as well as Directors of the Company, will abstain from voting on any investment decisions taken by the Board.
Control of the investment process is key for managing risk within the Company and each acquisition
and disposal will be subject to the investment process prior to any determination to proceed.
Due diligence
Once terms have been agreed with a vendor, and prior to entering into any contract in relation to any investment, the Investment Adviser will undertake a detailed due diligence process including (where appropriate):
§ preparing a detailed purchase report and supporting valuation, including supporting cashflows and an internal rate of return analysis;
§ instructing its Zimbabwean and UK legal advisers to undertake legal due diligence on the relevant business or assets including, without limitation, in respect of title, key contracts and licences and regulatory matters;
§ instructing other advisers including tax advisers, accountants, surveyors and consultants to conduct due diligence as may be appropriate;
§ instructing professional advisers (tax, accounting, legal and financial) to advise on the appropriate structuring of any investment as may be appropriate;
§ ensuring all third-party reports are supported by appropriate professional indemnity insurance levels; and
§ negotiating and obtaining appropriate financing (if required) with a reputable bank on favourable terms.
The Company will consider all information received by and prepared by the Investment Adviser during
the due diligence process and then determine whether to proceed with the relevant investment in line
with the Company's investment policy and objectives.
Ongoing Management
The Investment Adviser will have daily responsibility for managing the investment portfolio in
accordance with the decision of the Board. The Board will be provided with quarterly reports on the
performance of each asset.
Investment Adviser
The executive directors and senior management of the Investment Adviser, FMI Zimbabwe, have in excess of 50 years' combined experience in identifying opportunities and managing investments in Zimbabwe and the region. The Directors believe that the Investment Adviser has the requisite experience to assist the Company in successfully achieving the investment strategy and policy.
Shingai Mutasa, Julian Vezey and the other executives of the Investment Adviser have significant relationships in Zimbabwe and the region. Initially, it is through these relationships that the various investment opportunities will be identified. However, as the Group progresses with its investing policy it is expected that additional opportunities will arise as a result of the Group's track record.
Investment Advisory Agreement
Under the terms of the Investment Advisory Agreement, the Investment Adviser will advise the Company on investment opportunities, acquisitions and sales, exit strategies and manage the Company's portfolio of investments on a day-to-day basis with a view to achieving the Company's investment objective and strategy.
As consideration for the services to be provided under the Investment Advisory Agreement, the
Company will pay to the Investment Adviser an annual fee equal to 2% of the NAV of the Company for the period in respect of which the fee is paid. The Company shall also pay or reimburse the Investment Adviser in respect of all of its costs and expenses (including reasonable travel expenses) incurred in connection with the performance of its duties.
The services of the Investment Adviser are exclusive to the Company. However, the Investment Advisory Agreement permits the directors, officers and agents (each an "interested party") of the Investment Adviser to:
a) buy, hold and deal in investments for their own account;
b) buy investments from or sell investments to the Group provided that all the parties to any such transaction are disclosed to the Group and the transaction is effected on an arm's length basis; and
c) act as a director, partner or other officer of other investment funds or companies provided that any actual or potential conflict is disclosed to the Company and effectively managed by the Investment Adviser through the imposition of Chinese walls and similar steps. Provided that the conflict is effectively managed, the interested party is not obliged to offer to the Group all investment opportunities of which he becomes aware through other positions but must, where possible, allocate such opportunities on an equitable basis between the Group and his other interests.
The Investment Advisory Agreement may be terminated by either party giving not less than six months' notice in writing. The Investment Advisory Agreement is also capable of summary termination in certain circumstances, including the occurrence and continuance of a material breach of the terms of the agreement and the occurrence of an insolvency event in respect of the Company or the Investment Adviser.
Neither the Investment Adviser nor any of its directors, officers, employees, agents and delegates shall be liable to the Company or otherwise for any error of judgement or for any loss suffered unless such loss arises from either gross negligence, fraud, bad faith or wilful default on the part of the Investment Adviser in the performance or non-performance by it of its duties and obligations. Furthermore, the Company agrees to hold harmless and indemnify the Investment Adviser and any appointed delegate against all losses, actions, proceedings, claims, costs, demands and expenses which may be brought against, suffered or incurred by the Investment Adviser or any appointed delegate unless such loss is as a result of the negligence, fraud, bad faith or wilful default of the Investment Adviser or that of any delegate.
Related Shares:
Masawara