ALTHOUGH I'm (unfortunately) not a shareholder in the PSG Group, enormous value can be garnered just by glancing through this adventurous investment company's annual report.
Executive chairperson Jannie Mouton is always refreshingly candid about corporate matters, and you won't find the stuffy executive-speak that usually characterises an annual review.
I've always keenly anticipated PSG's annual report, ever since the company won my undying admiration for quoting my all-time favourite musician - the late, great Frank Zappa - in a previous annual report. But let's not go there right now (and no, the quote did not have anything to do with yellow snow).
What caught me eye this year was Mouton's admission that PSG might have made a mistake in unbundling its major stake in promising mass banking specialist Capitec in 2003.
He said the company believed it was the right decision at the time to unbundle Capitec – adding, rather intriguingly, that PSG was then a potential hostile takeover target. (Hmmm... would that have been Absa, perhaps?)
While most chairpersons would probably prefer not to highlight the painful past, Mouton reminded shareholders that "before then, we owned 58% in this great company as opposed to 34.9% today".
He did add, though, that PSG shareholders remain in a neutral position if they held onto their unbundled Capitec shares.
PSG, on the other hand, had to incur quite a cost – not to mention the dismantling of its original empowerment partner, Arch Equity - to rebuild a strategic stake in Capitec. So far, it's clearly been worth the effort.
Of course, one should perhaps look at another examples of letting go, where the company initiating the unbundling might really regret the decision in later years.
A classic example would be automotive components manufacturer Control Instruments, which split off vehicle tracking firm Mix Telematics about three years ago.
Mix looks a nifty little business (so much so that Imperial recently bought a strategic stake), and I suspect Control must have missed its steady annuity income when the global financial crisis smashed prospects in the automotive sector.
Life after Life?More recently, there was the proposal by Cape-based empowerment group Brimstone (I'm purposefully ignoring Mvelaphanda, because it is intent dismantling its investment portfolio to realise underlying value) to sell off and unbundle the bulk of its stake in newly-listed private hospitals group Life Health.
Brimstone is set to retain only a small stake in Life, which, in view of Life's underwhelming listing, may seem a reasonable option at the moment. But could there be regrets over the longer term?
Of course, Brimstone (and they're a great bunch of operators) may well clinch such convincing future deal flow that shareholders are satisfied that there is indeed - as one shareholder at the recent annual general meeting (AGM) put it - "life after Life".
Another Cape-based investment group, Trematon, may well have come under question for recently selling off its strategic stake in listed property group Ingenuity - especially since the transaction took place at the bottom of the real estate cycle.
This week Trematon made a move to buy outright control of Club Mykonos Langebaan (which must have enormous long-term development potential), signalling to shareholders that the proceeds from the Ingenuity deal would not lie idle. But back to PSG. I think after the Capitec lesson the company will be playing for keeps.
Consequently, shareholders attending next week's AGMs for the various PSG groupings (Zeder and Paladin specifically) may be wasting their breath in pitching questions around the possibility of unbundling or separately listing promising and valuable investments like KWV Holdings, CapeVin and the much-mooted private schools business, Curro.
Of course, a more pertinent enquiry might be whether PSG - fresh from a R200m preference share issue - intends increasing its exposure to Capitec's fast-growing mass banking business.
- Fin24.com