Edgars Stores Limited has proposed a recapitalisation plan through renounceable rights offer of 274,745,630 ordinary shares, the Zimbabwe Stock Exchange-listed clothing retail outlet, announced Tuesday.
A renounceable right is an offer issued by a corporation to shareholders to purchase more shares of the corporation’s stock, usually at a discount.
In a circular to shareholders, the company reeling from the effects of Covid-19 lockdown said the nominal value of the shares is ZWL$0.01(1ZWL Cent) each, at a rights offer price of ZWL$0.2548 (25.48 ZWL Cents) per share, based on five new ordinary shares for every six ordinary shares in issue as at the record date.
“The rights offer shares represent 45.66% of the company’s enlarged ordinary share capital post the proposed rights offer,” said the company in the circular.
“In order to maintain the sustainable growth and profitability of the businesses going forward, the board has decided to raise and inject additional capital into the business.”
Through the capital, Edgars seeks to intensify productivity of existing footprint, widen and deepen product portfolio offered by the group’s credit and financial services, ensure sufficient depth and breadth of inventories.
The group also seeks productivity improvements through digitisation leveraging on data science and analytics for customer retention and increased market share, the introduction of online shopping, customer-facing digital interactive platforms and enhanced planning tools and manufacturing capacity.
Refurbishment initiatives at stores and extension of geographical footprint through the commissioning of new sites are also part of the reasons for the move.
The proposal is however subject to approval by the Reserve Bank of Zimbabwe’s Exchange Control Department and Edgars members at the extraordinary general meeting (EGM) slated for June 16.
“If the renounceable rights offer is not implemented as outlined in this circular, Edgars will be unable to effectively compete in the market,” said the company.
“The company will face significant capital expenditure constraints, high finance costs and unmet working capital requirements.”
The circular further explained that failure to implement the proposal would see the company becoming limited in capacity to write new business under Edgars Financial Services while continuing to experience operating inefficiencies from inefficient and unproductive methods among other operational and profitability challenges.