LIFESTYLE Holdings has defaulted on its obligation to pay out minority shareholders who opted for cash under an arrangement that involved issuing of new TN Harlequin International shares in exchange for Lifestyle shares.Lifestyle de-listed last year after shareholders voted in favour of a scheme of arrangement which resulted in them owning shares in new entity TNHI, a Mauritius-registered firm.
TNHI, which owns 100 percent shareholding in Lifestyle Holdings, was set up by the directors of Lifestyle as a vehicle to raise offshore funding for the group’s operations.
A cash option was approved for shareholders not willing to exchange their Lifestyle shares for TNHI shares.
Lifestyle Holdings offered a cash consideration of US$0,00645 for every Lifestyle ordinary share held, payable in four equal instalments.
The cash conversion price of US$0,00645 was at 61,25 percent premium of the trading price. The first payment date was July 5, 2013, some sources said yesterday. It has, however, emerged that Lifestyle has failed to fulfil its obligation on two instalments.
“The first instalment was due on July 5, 2013 and that was fully paid. However, Lifestyle is yet to fulfil its obligations in respect of second and third instalments that were due on October 3, 2013 and January 1, 2014 respectively,” said a source familiar with the developments.
The outstanding amount could not be established. Lifestyle chief executive Mr Tawanda Nyambirai could not be reached for a comment yesterday.
Prior to the approval of the scheme of arrangement, the Securities and Exchanges Commission of Zimbabwe had filed a High Court application arguing the proposed transaction violated rules requiring transparency and independence. It said there were material conflicts of interest, as the company was advising itself through TN Financial Services.
It also noted that de-listing of Lifestyle Holdings effectively destroyed any possibility of shareholders ever knowing the goings of their company, as was the case with CAPS Holdings which left shareholders holding merely onto share certificates.
SECZ said the schemes of arrangement were being abused as they were being used by bankrupt companies to escape public scrutiny and avoid being held accountable.
Lifestyle, which operates furniture manufacturing and retail and fast moving consumer businesses, is facing challenges and the group has significantly scaled down.
Lifestyle founder Mr Nyambirai said his business empire would not collapse as he is working to realign his remaining businesses to the prevailing macro-economic conditions.
In an interview recently, the Harare businessman took great exception to negative media reports that the business empire he toiled to build was crumbling, pointing out the reports are baffling as the group is simply right-sizing as everybody else is doing.
“Lifestyle is doing what everybody else should be doing in the circumstances, right sizing. We shall only keep those businesses where we are, or can be better than our competitors. Lifestyle shall not crumble,” he assured.
Explaining the inevitable need to right-size, Mr Nyambirai said TN Harlequin Luxaire – as the largest furniture manufacturer in the country – its operations employ in excess of 1 400 people, but challenges require it to reduce costs in order to survive the economic difficulties.
“Its manufacturing and retail arms employ in excess of 1 400 people. To carry this level of staff costs, the company has to generate sales in excess of US$1,8 million per month. (But) the average sales per month for 2013 were far below this figure,” Mr Nyambirai said.