LAWRENCE Sikutwa & Associates Limited (LSA) and ZFI Holdings Limited (ZFI), the two largest shareholders in Madison Financial Services (MFS), have separately executed Share Purchase Agreements (SPAs) with XYLEM Trading (Pty) Limited (XTL), relinquishing their combined 72.05 per cent shareholding in the insurance giant.
According to a market announcement, LSA and ZFI, a private limited company incorporated under the laws of the Republic of Mauritius and legal owner of 34.91 per cent of the ordinary issued shares in MFS, are relinquishing their shareholding in MFS following the execution of separate SPAs.
XTL, a South African investment vehicle with a diversified investment portfolio, which includes regulated financial services is, therefore, in the processes of acquiring the combined shareholding of LSA and ZFI in MFS, which amounts to 72.05 per cent of the issued ordinary shares of MFS.
“In terms of the SPAs, the transaction involves the following two separate acquisitions of shares: i) The acquisition by XTL of the 100 per cent shareholding in ZFI from Enko Africa Private Equity Fund Limited (Enko) as the first leg of the transaction. ZFI holds a total shareholding of 34.91 per cent in MFS; and ii) The acquisition by XTL (via ZFI) of 37.14 per cent shares in MFS from LSA, as the second leg of the transaction. The net result of the above two acquisitions is that XTL will effectively end up owning 72.05 per cent of the ordinary issued shares of MFS via ZFI,” the announcement revealed.
It explained that the rationale of the imminent transaction, expected to mature this month, was primarily to inject capital into MFS and its subsidiary companies, which had accumulated significant debt in recent years.
“MFS was formed in 2007 and listed on the LuSE in 2014. The listing provided an exit route for the IFC and entry route for ZFI, to invest in MFS and acquire a significant equity stake in the company. Post-listing, LSA and ZFI emerged as the two major shareholders in MFS. However, since the listing, there has not been any major capital injection into MFS. Both LSA and ZFI recognise the need to support the continued growth of MFS, through capital injection to sustain the operations of the core units of the company, namely, MGEN, MLIFE, MFinance, MAMCo and MGenTZ and, thereby, ensure that they can compete effectively, retain market share and continue to grow going forward,” read the announcement.
“The effective date of the transaction is the date on which a share trade is executed on the LuSE whereby XTL will buy the shares held by LSA in MFS. Execution of the share trade is expected on Thursday 21st January, 2021, with funds settlement on Friday 22nd January, 2021.”
LSA is a private limited company with Zambian shareholding, which was incorporated in 1995 by the management team at Madison Insurance Company Limited, who went on to undertake a management buyout of the company from the Meridien Group.
LSA played a pioneering role in the transformation of Madison Insurance and its growth into a leading insurance services business in Zambia.
In 2005, following regulatory reform, Madison Insurance was unbundled into Madison General Insurance Company Zambia Limited (MGEN) and Madison Life Insurance Company Zambia Limited (MLIFE).
In 2007 the International Finance Corporation (IFC), the private sector arm of the World Bank Group, decided to invest in the LSA Group and this resulted in the creation of Madison Financial Services Limited (MFS) in which LSA held 81.5 per cent and the IFC held 19.5 per cent.
MFS thus became the holding company for the following subsidiaries: MGEN; MLIFE; MGen Insurance Tanzania Limited (MGenTZ); Madison Finance Company Limited (MFinance) and Madison Asset Management Company Limited (MAMCo).
In September 2014, MFS was publicly listed on the Lusaka Securities Exchange (LuSE) and the listing provided an exit route for the IFC and presented an investment opportunity for new institutional investors, who included ZFI.
The proposed transaction, therefore, enables LSA to unlock value and realise its investment in MFS and exit by selling its 37.14 per cent shareholding to XTL via ZFI.
Both SPAs follow an Extraordinary General Meeting (EGM), held on May 4 and 18, 2020, where shareholders resolved that MFS dispose of some of its assets in order to raise capital to meet some of the Group’s liabilities.