Zimplow (market cap $24m) has issued a cautionary advising shareholders that it is seeking their permission to acquire 57% of Tractive Power Limited (market cap $18m). For those not in the know Zimplow is one of the country's oldest OX-drawn implements manufacturers() while Tractive is also a long established supplier of tractors and mining eqiuipment visit here for a full profile . I am really impressed by management's move especially after my blog on their future which can be read here.
Tractive is one of the investments being sold by the RBZ in its long drawn restructuring exercise. Zimplow is a manufacturing company that has survived the harsh economic environment of yesteryear. Although this acquisition was largely unexpected, it makes perfect sense and is a sure way of ensuring that Zimplow survives for years to to come. Most farming equipment suppliers the world over had long made the move to diversify their income sources. Zimplow has really done well on this one!! Market watchers are a little surprised that Zimplow which appears large in terms of market capitalisation has pulled off this deal in a company that should in practice be larger than them, if you read their profile.
If everything goes according to management's plan, this deal is a deal made in heaven for Zimplow shareholders for a number of reasons. Apart from building a a diversified business, Zimplow will have access to new markets and customers, at a scale they could never have managed on their own. The enlarged business will scale up and enjoy economies of scale. And most importantly a combined market cap of over $50m will push Zimplow towards the bigger cap counters on the ZSE if they decide to buy out minorities at some stage. So all in all this is good for everyone!!
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