TN Bank Ltd listed on the Zimbabwe Stock Exchange on July 11 2012 in a ceremony officiated by the Minister of Finance Tendai Biti. The listing was a culmination of a transaction approved by shareholders of TN Holdings Ltd entailing the demerger of TN Bank Ltd from TN Holdings Ltd and the recapitalisation of TN Bank through the issue of a 45% shareholding to Econet Wireless Zimbabwe Ltd. Shareholders unanimously approved the transaction at an extraordinary general meeting held on July 5 2012. Rationale for demerger Prior to the demerger, TN Bank Ltd was a subsidiary of a diversified group. This allowed the bank to leverage on synergies with other members of the TN Holdings Ltd group through sharing infrastructure such as the distribution network, sharing head office resources, and providing funding to those customers of the other subsidiaries in the group who qualified for funding after going through the vetting and credit appraisal processes laid down by TN Bank Ltd.
This model resulted in the reduction of the burden of occupancy costs as the occupancy costs of the common areas are shared between the furniture company, the bank, the Econet Franchise Shops, and other business units that operate from the same floor space.
The model also succeeded in reducing the head count per banking branch as some basic banking services can be accessed outside the banking branch on an agency arrangement. Through this model 45,899 Thera savings accounts were opened with TN Bank Ltd by customers of TN Harlequin Luxaire, the furniture manufacturing and retailing subsidiary of TN Holdings Ltd, now Lifestyle Holdings Ltd.
The demerger entails the establishment of a specialised head office for TN Bank Ltd that will be focused on TN Bank Ltd alone without any additional group responsibilities. Similarly, the restructured board of TN Bank Ltd is no longer accountable to the directors of Lifestyle Holdings Ltd and is now directly accountable to the shareholders of TN Bank Ltd. TN Bank Ltd is no longer a subsidiary of Lifestyle Holdings Ltd, although it shares some shareholders with Lifestyle Holdings Ltd. However, TN Bank will still be able to exploit synergies with the subsidiaries of Lifestyle Holdings Ltd, although this will be done strictly at an arms length basis.
Each of the several businesses carried on by Lifestyle Holdings Ltd through its subsidiaries have significant potential for growth. The nature of risk and competition involved in each of these businesses is distinct from the others and consequently each business or undertaking is capable of attracting a different set of investors, strategic partners, lenders and other stakeholders. The board of Lifestyle Holdings Ltd also held the view that the market capitalisation of TN Holdings Ltd did not reflect the full value of the constituent parts of the TN Holdings Ltd Group.
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The demerger enabled shareholders to realise full value of their investment as shown by the current trading patterns of both TN Bank Ltd and Lifestyle Holdings Ltd shares since listing.
The remaining Lifestyle Holdings businesses and TN Bank business have tremendous growth and profitability potential and are at a stage where they require focused leadership and management attention. Hence, simultaneously, with the re-organisation and segregation of TN Bank’s business from Lifestyle Holdings’ businesses, TN Bank and Lifestyle Holdings have re-organised the management of their respective businesses and undertakings to provide focused management attention and leadership required by each of the separate businesses.
It is believed that the segregation will create enhanced value for shareholders and allow a focused strategy in operations, which would be in the best interest of Lifestyle Holdings, its shareholders, creditors, clients and all persons connected with Lifestyle Holdings as well as TN Bank shareholders. The demerger has, and will continue to 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 profiles.
