Retail and distribution group, Axia Corporation Limited, has availed plans to delist from the Zimbabwe Stock Exchange and list on the forex denominated Victoria Falls Stock Exchange (VFEX).
The plan is expected to be finalised by March this year.
In its circular to shareholders, the company revealed that its board of directors met on November 22 last year and agreed to delist from the ZSE and list on the VFEX.
Axia has revealed its timetable for the proposed transaction, which includes the holding of an extraordinary general meeting (EGM) on February 2 to get approval from shareholders to delist from the ZSE and subsequently list on the VFEX, the termination of Axia ZSE listing on February 28, transfer of Axia share register from the ZSE to the VFEX on March 2 and the estimated completion of Axia’s VFEX listing on March 3.
The company said the reasons for the proposed transaction include access to US dollar capital to assist in its capital expenditure, working capital requirements and regional expansion initiatives, free repatriation of dividends and proceeds from the disposal of shares through offshore settlement for foreign shareholders, favourable tax incentives for investors of zero capital gains tax and a 5% withholding tax for foreign investors to enhance shareholder returns as well as lower trading costs of 2,12% compared to 4,63% on the ZSE, which would enable Axia to making savings and retain more value for shareholders.
It said listing on the VFEX would also give a US-dollar valuation of Axia, allowing shareholders to realise the true value of their holdings and provide a more accurate benchmark of the stock’s performance, while mitigating valuation volatility; enhancing the company regional profile and commercial standing; strengthening the company’s prospects for both local and regional expansion; and will ensure more efficient financial reporting through US-dollar denominated group financial statements, which will contribute to a lower risk perception for the company as well as increasing the company’s leverage to access other forms of finance at favourable terms.
The company revealed that the ZSE granted it authority to delist its shares from the bourse on condition that the Axia board approves the listing of the company’s share on the VFEX as well as the passing by shareholders of the company of the resolution at February 2 EGM. The ZSE also requires Axia to obtain all the necessary regulatory approvals as may be required, including the issuance of a letter of good standing by the ZSE to Axia.
Axia will join Padenga Holdings Limited, Simbisa Brands Limited, SeedCo, Caledonia Mining Corporation and Bindura Nickel Corporation Limited and National Foods to list on the VFEX.
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Flight of companies to the VFEX comes at a time the ZSE has become one of the worst performing bourses in the region after government put in place measures in May last year to rein in galloping inflation and curb volatility on the exchange rate. This includes a 40% capital gains tax on traders who dispose of shares in less than 180 days.
Capital gains tax is a levy on the profit that an investor makes from the sale of an investment such as stock shares.
In an interview with sister paper Zimbabwe Independent last year ,ZSE chief executive officer Justin Bgoni revealed they have been hitting brick walls in lobbying for the removal of the tax enacted through Statutory Instrument (SI) 103A.
“We lost the case and the government says the tax stays but it makes the ZSE unattractive and there is no doubt the government is against trading within six months. Unfortunately for us as an exchange we want to trade as much as possible because price discovery is better. On VFEX (Victoria Falls Stock Exchange) there is no capital gains tax. The challenge is on the ZSE. The government informed us that they were doing this to dampen speculation and protect the Zimdollar currency. That is why we keep on lobbying but at the moment it's law,” he said.
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