STRUGGLING Bulawayo firm, Merlin, has been given up to June 30 to secure an investor or face liquidation.
BY MTHANDAZO NYONI
The iconic manufacturer risks joining other big companies that went under in Zimbabwe’s second city over the past decade, a new report has revealed.
Merlin survived liquidation over a decade ago and was placed under judicial management for a third time in December 2011.
Cecil Madondo of Tudor House was appointed judicial manager.
Merlin, established in 1954 and owned by business tycoon, Delma Lupepe, requires $30 million fresh capital spread over a period of five to 10 years to be brought back to life.
Lupepe took over Merlin in 2004 through his investment vehicle, Maydeep Investments (Private) Limited, after the troubled textiles giant was discharged from judicial management.
By the time he bought the company, technology was moving ahead of it and the arrival of diapers which killed the cotton nappy business, and the influx of cheap linen products from Asia did not help matters.
A report presented by Madondo at last month’s meetings of creditors suggested that Merlin required $2,1 million in the short-term to purchase raw materials and to refurbish plant and machinery to start production.
A further $4,5 million would be needed for major repairs and maintenance to bring the company back to near full capacity.
The report said the company would require $23,4 million for the setup of a new plant and that $6,3 million would also be required to discharge the company’s liabilities.
Merlin owes creditors more than $4 million.
Its total assets currently stand at $2,2 million down from $3,8 million when the company was placed under judicial management in 2011. Its current liabilities are at $6,2 million, up from $4,3 million in 2013.
A second statutory report dated January 3 2017 and signed by Madondo, revealed that the future of Merlin looked bleak after several attempts to bring it back to life seemed to have failed.
In the document, Madondo said he made several attempts to revive the company to no avail.
In July 2014, he published an expression of interest document inviting credible investors to come to the company’s rescue, but there were no takers.
He also made an application for a loan of $1 million from CABS but the application was unsuccessful, with the bank saying available funding was not meant for companies under judicial management.
Madondo said he engaged the Insurance and Pensions Commission in July 2013 for a short term loan with no luck.
Other efforts were made by shareholders in 2015 who tried to court a Japanese investor that had promised to inject $30 million into the business. The plan failed too.
Madondo also negotiated with several suppliers of raw materials and services who had agreed to support Merlin and these included Zesa, Bulawayo City Council, Finnemore Enterprises, Girfiar and Hwange Colliery Company Limited.
Madondo said the company was viable and liquidating it would be against the economic revival plan set by the government under the economic blueprint — Zim Asset.
But due to its failure to attract investors, the company now faces liquidation.
“Finally, in the event that an investor has not been found or the company has failed to raise working capital to resume operations by June 30 2017, the judicial manager is hereby authorised to give notice in terms of Section 306 (m) of the Companies Act (Chapter 24:03) and in terms of the court order dated 6th of October 2016 which states that: On the vote of the majority of creditors in number and in value, and in the event that an assessment of the company’s prospects shows that there are no prospects of the company becoming a successful concern, it shall be wound up in terms of Section 306 (m) of the Companies Act (Chapter 24:03),” reads part of the report.
But Lupepe insists Merlin would never be liquidated as it was still viable.
He said they had secured a Japanese investor who was prepared to put $30 million into the business, but the challenge was that the company was under judicial management.
“There is no need for this company to be under judicial management. If it had not been for judicial management, we would be operating by now. We have funding and proof that we can operate,” he told Standardbusiness in an interview.
He accused Madondo of bypassing shareholders in decision making concerning Merlin and said they had since challenged that in the courts.
He said they had immediate solutions to operate the company “but it seems there is a hidden agenda to take Merlin down and resurface in Harare”.
“There is potential in that company. We have plans to start producing pampers and other products,” he said
Lupepe said the new equipment they were planning to set up had a capacity to produce more than 250 tonnes of products per month and generating more than $20 million revenue a month.
The going down of Merlin, one of the major pillars of Delma Lupepe’s empire, would deal a huge blow to the prominent businessman who used to run several businesses which include Bernard Construction, Zimbabwe Express Services and Merspin among others.
He is also into mining.
With Zimbabwe’s economy in the intensive care unit, not much seems to be going well for the tycoon’s business interests.
Other companies owned by the businessman, Merspin and Zimbabwe Express Services Limited and were once dragged to court in 2011 by Old Mutual Property Investments Corporation over a $450 000 debt.
However, Lupepe is not alone in this predicament.
Many companies in the textile industry in Zimbabwe have suffered from an influx of cheap second-hand clothes and imports from China, which have hurt profitability, leading to the closure of firms such as Textile Mills, David Whitehead, Belmore Manufacturers and Ascot Clothing.
National Blankets and Security Mills are also under judicial management, while Cold Storage Company, National Railways of Zimbabwe and Dunlop Zimbabwe have down-sized, leaving thousands jobless.