Starafrica seeks to offload Red Star

TRADE in Red Star Holdings Ltd stock was suspended last week after the company asked the ZSE to hold transaction in the company pending a possible sale of the retail chain.

Starafricacorporation, Red Star’s holding company, was supposed to delist from the ZSE last week before the suspension.
“Application has been made to suspend rather than delist the Red Star shares on the Zimbabwe Stock Exchange to facilitate the possible sale of the listed holding company as part of the ongoing restructuring of Red Star,” said Vimbayi Nyikadzino, Red Star Holdings secretary.
Red Star which listed on the bourse in 2006 has been a drain to Starafricacorporation where it contributed around 36% of revenue but more than 50% of expenses to the holding company.
On November 12, Red Star Holdings Ltd released a circular to its shareholders regarding the proposed acquisition by Starafricacorporation Ltd of the company’s entire issued share capital.
Directors of the retail chain, which owns a number of supermarkets across the country, decided to delist from the bourse as part of  efforts to restructure. The move would have seen Starafricacorporation buying out minority shareholders.
Approval was sought, through a scheme of arrangement, to approve the buying out of minority shareholders and urgently recapitalise the business to address the expensive debt accumulated over the past years.
“The scheme (Scheme of Arrangement), which was approved by the requisite margins by the shareholders of Red Star on 3rd December 2010 was sanctioned in terms of section 191 (2) of the Companies Act by the High Court of Zimbabwe on 15th December 2010,” said Nyikadzino. “The Court Order and the scheme circular in terms of section 191 (2) of the Companies Act was registered with the Registrar of the Companies on 20th December 2010 and the Scheme is now binding on all Shareholders of Red Star from 20th December 2010.”
It is expected that the approval of the scheme of arrangement would enable the struggling wholesale and supermarket group to enjoy the benefits which come with being wholly owned by Starafricacorporation including access to resources.
Consequent to the approval of the scheme of arrangement by the shareholders and the courts, the directors of the company said all documents of title to Red Star shares ceased to have any value with effect from December 20 2010 other than for the purpose of claiming the scheme consideration.
Red Star’s listing on the bourse four years ago came at a time when the retail sector faced challenges especially price controls and massive shortage of goods.
Things were worsened by the decision by government to slash prices in 2007 which resulted in empty shops.
Players in the retail sectors have failed to fully recover from the effects of the debilitating economic environment and efforts to recapitalise through rights issues have largely been unsuccessful save for a few exceptions such as OK Zimbabwe.

 

 

Leonard Makombe


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