Cape Town - Stellenbosch-based investment giant Remgro looks set for a marked increase its stake in liquor group Distell - thanks mainly to a kind gesture from another Stellenbosch-based investment group, PSG.
According to an announcement on Friday, Remgro has "dibs" on 28.5 million shares in unlisted CapeVin Holdings that were acquired as part of a R127m deal between PSG-controlled Zeder Investments and Phetogo Investments (the main empowerment partner at KWV Holdings).
The deal - dated January 6 2010 - saw Zeder acquiring 38 million shares from Phetogo, but then nominating Remgro to acquire 75% of these CapeVin Holdings shares.
Why Zeder nominated Remgro to acquire the shares is not made clear in the announcement. Zeder, which recently had a rights issue, certainly has enough cash to acquire more shares in CapeVin Holdings.
A possible explanation is that Zeder - which ranks as the biggest shareholder in KWV Holdings (Distell's less profitable rival) - would rather have Remgro as an ally as it endeavours to make a return from its substantial investments in the local liquor industry.
Because Remgro and PSG's Zeder are effectively acting in concert, the Phetogo deal has triggered a mandatory offer to minority shareholders in CapeVin Holdings and JSE-listed CapeVin Investments.
Both CapeVin entities hold stakes in Distell as their only asset.
Remgro and PSG - via Zeder - will offer 335 cents per share and 7005c/share to shareholders in CapeVin Holdings and CapeVin Investments respectively.
At first glance, the offer prices are rather derisory. Based on a share price of 6 400c for Distell, CapeVin Holdings carries a "see-though value" of about 430c/share; CapeVin Investments is worth about 8 940c/share.
A market watcher noted that while the offers were well below the intrinsic value of both CapeVin Investments and CapeVin Holdings, shareholders (especially in the latter) might welcome an offer pitched markedly higher than an original buy-in price.
CapeVin Holdings, since being split off from KWV Holdings in late 2009, has been trading mostly around the 280c level on an over-the-counter basis.
The market watcher said: "People that have been buying CapeVin Holdings at or around the 280c level might find the 335c/share offer quite attractive."
He reckoned the offer was fair. "One can't really quibble too much about the discount to intrinsic value. Phetogo, for whatever reason, opted to sell its CapeVin shares at these levels."
Zeder already owns 34.9% in CapeVin Holdings, which in turn holds 51% of CapeVin Investments. This translates into roughly an 8% holding in Distell.
Remgro already holds a 9.6% stake in CapeVin Investments, but ultimately holds about 32% of Distell.
'Not surprising'
The buyout offers are not that surprising, with Finweek and Fin24.com speculating - at the time of the KWV Limited restructuring - that both Remgro and Zeder could look at ways to increase their exposure to the highly profitable Distell.
Reading between the lines of Friday's announcement, it would seem Remgro could push its effective stake in Distell through the 35% mark.
All shares acquired from CapeVin minorities will accumulate to Remgro, until such time its stake in CapeVin Investments is equal to Zeder's on a "see-through" basis.
That would give Remgro a dominant shareholding in Distell, with beer giant SABMiller still retaining a 29.7% stake in the liquor group.
Zeder currently (ie before the latest Phetogo deal) holds about 18% of CapeVin Investments.
- Fin24.com