Econet Wireless Zimbabwe Limited (EWZL) the country’s largest listed company by market capitalisation is planning to demerger its smart technology business from the mobile telecommunications business. The new companies after the demerger will be EWZL (the mobile telecommunications business) and Cassava SmarTech Zimbabwe Limited (the smart technology business). The major companies under Cassava SmarTech include Ecocash and Steward Bank. The demerger is expected to be approved during the Annual General Meeting which is going to be held on Thursday, 29 November 2018. The current shareholders of EWZL will be given shares in Cassava SmarTech Zimbabwe Limited pro rata to their current holdings over and above the subscriber shares. Cassava SmarTech Zimbabwe Limited (CSZL) will then be listed separately on the Zimbabwe Stock Exchange on 11 December 2018.
Structure of EWZL before the demerger
Structure of EWZL after the demerger
Structure of Cassava SmarTech Zimbabwe Limited after the demerger
Analysis of EWZL’s financial performance against that of its peers in the telecoms industry in Africa shows that whilst EWZL is performing as well as any of these operators, its share price reﬂects the value of the company that is largely driven by the mobile telecommunications business but does not reﬂect the true value of the underlying business segments such as the smart technology businesses that the Company has developed. The demerger will unlock the value of the smart technology business.
The proposed demerger will enhance management focus and allow focused implementation of strategies and improve capital allocation decisions. It will also enable investors to separately hold investments in businesses with different investment characteristics thereby enabling them to select investments which best suit their investment strategies and risk profles. The demerger will also provide scope for the demerged businesses to collaborate and expand independently of each other but whilst recognising and exploiting the synergistic benefts that have historically existed between the two companies.
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