South Africa: Windfall on the Cards for Remgro Investors

Source from:  Business Day (Johannesburg) 12 August 2008 08/13/2008

REMGRO's plan to spin off its stake in British American Tobacco (BAT), and the related establishment of a new investment company, Reinet, came as a surprise when it was announced on Friday - but only because it came much later than analysts had been expecting. In fact, for years now analysts have suggested spinning BAT off from Remgro. Although a hugely cash-generative tobacco group is handy for Remgro when the other listed and unlisted investments in SA go through a rough patch, it didn't seem to make much sense to tie the local interests with such a large stake in the tobacco industry. In addition, with the rise of ethical investing, buying tobacco industry shares is considered by some to be morally questionable. In the event, the Rupert family say they decided to spin BAT off because of tax considerations in Luxembourg. Remgro has fairly consistently traded lower than the intrinsic values of its investments, so one can conclude that buying Remgro shares should give shareholders a fillip later when Reinet and BAT shares list separately. The group's investments after the BAT unbundling includes holdings in RMB/FirstRand, Rainbow Chickens, Distell, Medi-Clinic, Impala Platinum and Nampak. There are also unlisted shareholdings, including stakes in Unilever SA , TSB Sugar and Total SA. New big listings have become few and far between on the JSE, and so the restructuring and listing of additional shares is certainly good news for the local bourse. Tobacco is a mature product in developed country markets, but BAT performed well last year in the 180 global markets in which it operates, relative to the global economy. Enditem