Remgro eyes SABMiller cleanout
bdlive.co.za - Oct 21st 2015, 09:15
Remgro may buy SABMiller’s 27% stake in liquor group Distell if it comes into play following the Anheuser-Busch InBev (AB Inbev) buyout of the brewer.
In an interview this week, Remgro CEO Jannie Durand indicated the blue chip investment holding company might be interested in SABMiller’s interest in Distell depending on the price asked.
Remgro already holds about 30% of Distell, the second-largest maker of cider in the world, which also owns global brands such as Scottish Leader and Amarula.
The opportunity to control a much larger piece of Distell has come about because of pre-emptive agreements that would be triggered should AB InBev choose to dispose of a minority stake in Distell.
The task ahead of AB InBev after a successful merger is immense, as it has to integrate two geographically diverse companies. It was likely the group would clean out SABMiller’s portfolio, which includes a variety of holdings in other companies, such as the minority stake it holds in Distell, said Afrifocus Securities analyst Johan Scholz.
Asked about the effect of the megadeal on the Distell shares SABMiller holds, Mr Durand said Remgro had "pre-emptive rights over that stake".
Remgro and Capevin had agreements in place, he said. Should the time come for AB InBev to dispose of the Distell shares, it would be required to offer them to Remgro and Capevin first.
Distell has a market capitalisation of about R38bn and is a highly illiquid stock because of the large stakes that are held by the three long-term investors.
Asked if Remgro would buy the highly prized holding, Mr Durand said, "It depends on the price." He declined to comment further other than to say there had been no discussions with SABMiller about Distell shares.
Remgro is exposed to Distell through its 50% stake in the Remgro-Capevin Investments joint venture.
Capevin has an effective interest in Distell of 26.86%. Remgro has exposure to Distell through its holding in Capevin.
Chris Otto, chair of Capevin, said the pre-emptive agreements between SABMiller, Remgro and Distell had been put in place in 1979 and many aspects of the agreement were protected by confidentiality clauses between the parties.
He declined to comment on the existence of specific pricing arrangements in any exercise of the pre-emptive rights.
Mr Scholz said it was unlikely Remgro would want the stake to fall into the hands of a new shareholder.
SABMiller had been a passive investor and had not sought board representation at Distell.
"I think they would be buyers," he said.
"It fits with their overall strategy and they have emphasised that they are looking to do acquisitions on those platforms of theirs and this fits in with the food and beverage platform."
Distell was also a company Remgro "know well".
"It has performed for them and it has always been their strategy if the opportunity comes to increase their stakes in the companies in the portfolio; they are known for following through with that."
Last month, SABMiller’s board recommended to shareholders a £44 per share bid from AB InBev.
The transaction has many regulatory hurdles to clear before it is concluded and there is likely to be some delay before a decision is made on the disposal of the Distell holding.
Should the acquisition of the stake proceed Remgro would have control of the company and it may seek to squeeze out minority shareholders.From DFM Publishers (Pty) Ltd
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