New information revealed on failed $2.5 billion CBZ bid

An ambitious plan by CBZ Holdings to create Zimbabwe’s largest financial services conglomerate has fallen through due to the Competition and Tariff Commission (CTC) imposing restrictive conditions that CBZ found unacceptable, according to new documents that have come to light. The failed deal involved a complex merger between CBZ Holdings, ZB Financial Holdings (ZBFH), First Mutual Holdings Limited (FMHL), and First Mutual Properties (FMP). If successful, the merger would have resulted in a diverse financial entity with assets surpassing US$2.5 billion, significantly transforming the nation’s banking, insurance, and property sectors.

After extensive negotiations and regulatory discussions, the deal was called off earlier this year after CBZ Holdings pulled out, citing the stringent conditions set by the CTC, especially regarding divestments, market practices, and potential conflicts of interest. Central to the agreement was CBZ’s intention to acquire a controlling 51% stake in ZBFH, starting with purchasing a 4.95% share from Chappo Investments and Tracetory Investments. This move would have triggered a mandatory offer to minority shareholders as per Zimbabwean laws and listing regulations.

However, concerns were raised by the CTC about significant risks of anti-competition that would arise from the merging of key sectors such as banking, reinsurance, real estate, and healthcare. In the insurance industry, combining First Mutual Re and ZB Re was seen as problematic as it could lead to high-risk concentration, limiting other insurers’ opportunities in the market. Additionally, merging Mashonaland Holdings and FMP under CBZHL and FBCHL raised apprehensions about potential market manipulation or collusion.

The CTC report highlighted fears that government clients who direct payments to CBZ Bank, like passport fees, could further solidify CBZ’s dominance in banking, disadvantaging competitors. Stakeholders worried that the merger might restrict their access to distinctive products and pricing models offered by separate banks. The Commission evaluated CBZ Holdings and FMHL as one entity for competition analysis, citing risks of collusion with FBCHL through shared ownership in Mashonaland Holdings.

Furthermore, concerns were raised about corporate governance, given National Social Security Authority’s substantial shareholding in the involved entities, potentially leading to conflicts of interest and compromised decision-making processes. To mitigate risks, the Commission proposed stringent remedies, including maintaining separate banking brands, divesting from certain holdings within 12 months, and seeking prior approval for share acquisitions beyond the 4.95% threshold. Employment protections were also put in place to prevent job losses for 24 months, excluding senior management levels.

Despite the setback, analysts anticipate CBZ will continue pursuing growth opportunities, albeit with more caution in future endeavors. The fallout from this failed merger highlights the challenges of financial consolidation in Zimbabwe’s tight-knit market and underscores the delicate balance needed to ensure transparency, competition, and good governance in the sector.