Remgro: the big buck(s)

THE conservative culture that permeates Remgro [JSE:REM] probably precludes punters getting overly excited about the Stellenbosch-based investment conglomerate's decision to cash in more than R1.3bn by selling its minority stake in packaging giant Nampak [JSE:NPK].

Agreed, the Nampak sale is – as Fin24.com has pointed out previously – probably merely part of a long-overdue shake-up of Remgro's sprawling investment portfolio.

Dorbyl will probably be dealt with next. (Of course, one does wonder if it really was worth waiting so long to dispose of the Nampak stake. Remgro could probably have sold its Nampak stake when the Bidvest Group [JSE:BVT] came knocking a few years ago.)

Without wanting to sound flippant about such matters, could the proceeds from the Nampak sale really be mobilised for anything more than bolstering a number of individual positions in the existing portfolio?

I'm certainly not expecting a big new acquisition, but rather to see the money filtered into the numerous (promising, I trust) technology and media investments that came to Remgro via the re-merging of corporate cousin Venfin.

In addition, having an extra sleeve of cash is comforting for a company that prides itself in regular dividends should the dreaded double dip come to pass.

Still, I think some of the comment by Remgro that accompanied the Nampak deal was quite revealing.

The company spoke of capital being "available for redeployment into assets which are more closely aligned with Remgro's investment strategy and in which Remgro has a higher degree of ownership and/or influence".

I have my own ideas about redeployment. But buying out the minorities in Rainbow Chicken [JSE:RBW] and Medi-Clinic Corporation [JSE:MDC] and going full tilt to buy out the other major shareholders in Distell Group [JSE:DST] – which I think will make Remgro a far more compelling investment vehicle – is most unlikely at this stage.

If anything, it will be a slow trickle. And Remgro, of late, has been content (as I reported in Finweek last week) to quietly build up its investments in selective investments (Distell/Capevin, Business Partners, Dark Fibre, Fundamo etc).

But in terms of further shake-ups at Remgro, I do think the reference to investments with a "high degree of ownership and/or influence" is significant – especially read in conjunction with the company stating that it will "now focus on its core investments".

What exactly would constitute a core investment at Remgro? Certainly the "industrial" (Distell, Rainbow, Medi-Clinic, Unilever and TSB) and "financial" (RMB Holdings [JSE:RMH] and FirstRand [JSE:FSR]) portfolios are core. With a collective value of roughly R50bn, these two segments represent the bulk of Remgro's value.

Media (e-tv and MARC) and technology (Seacom, Dark Fibre Africa and Tracker) are, relatively speaking, small – but seen as a future growth area.

The R5.7bn question for me is whether mining still ranks as a core investment for Remgro. Readers may remember that Remgro swapped the bulk of its resource investments (strategic stakes in Gold Fields [JSE:GFS] and Billiton) in 2000 to build up its position in financial services.

The company retained a small but valuable stake in Impala Platinum Holdings [JSE:IMP], and a major shareholding in diamond miner Trans Hex Group [JSE:TSX].

As the Trans Hex stake is about to be unbundled, Remgro will be left with a 4.4% stake in Implats as its only resource investment (if we exclude a really small holding in Kalahari Energy).

The Implats stake is slated as worth R5.7bn in Remgro's latest annual report – ranking as the fourth-biggest holding in the portfolio behind RMB Holdings (R9.8bn), FirstRand (R9.7bn) and Medi-Clinic (R7bn).

While Implats holds quite a presence in the portfolio, the investment can surely not be considered one where Remgro has a "high degree of ownership and/or influence".

Possibly the sole platinum investment is still considered strategic. But if Remgro does intend going big on the investment front, Implats would be very useful currency.

Of course, whether Impala is well priced for a big seller right now is debatable. Remgro may well prefer – as Imara SP Reid analysts Stephen Meintjes argues - to wait for Implats to unlock the full value from its Zimbabwean interests.

- Fin24.com