Alliance Holdings Limited has announced plans to offload its stake, including its subsidiary Alliance Capital Limited, to a South Africa investment vehicle.
The move, which is subject to the Reserve Bank of Malawi (RBM) approval, is aimed at bailing out the financially struggling Alliance Capital Limited, whose portfolio manager’s licence was suspended in April this year for contravening financial services laws.
In an interview on Friday, Alliance Holdings Limited group chief executive officer Christian Majavina admitted that Alliance Capital Limited is facing some challenges; hence, the decision to bring in new investors into the holding company.
He said: “Alliance Capital Limited has been facing challenges in servicing withdrawals by its clients as a result of asset maturity mismatches which has affected liquidity of the firm.
“Recoveries are ongoing even through positive, but very slow, that is why the current shareholders decided to invite a strong partner to come and invest.”
But Majavina could not divulge more details on the matter, saying the process has to go through regulatory approvals and thereafter more details will be unveiled.
Lawyer representing the prospective buyers, Tamando Chokotho, on Friday confirmed the deal, saying the transaction is currently undergoing regulatory processes.
He said: “I can confirm that we have instructions from the prospective investors who are willing and eager to takeover Alliance Holdings Limited and its subsidiaries subject to fulfilment of all the necessary regulatory processes and approvals which we trust shall be concluded soon.”
On his part, lawyer representing the shareholders, Gracian Banda, confirmed confirmed the transaction, saying they “are awaiting feedback from RBM”.
Alliance Holdings Limited, which entered the Malawi market in 2018, was founded by the shareholders of Alliance Capital Limited.
The firm has four subsidiaries, namely Alliance Capital Limited, Smile Life Insurance Company, Sycamore Consult Limited and Alliance Stockbrokers.
Earlier this year, some investors dragged Alliance Capital Limited to court over a breach of contract.
According to court documents, the investors were claiming K373.5 million plus interest and collection costs from the firm.
Court records show that the agreement was that Alliance Capital Limited would invest the money in short-term investments which can be liquidated within a short period of time.
The suspension of Alliance Capital Limited licence, according to the central bank, is for a period of 12 months from April 2 2021 to safeguarding the interests of investors and the public.
The central bank directed the company not to allow or accept new business, but concentrate on repaying liabilities to investors and other creditors during the suspension period n