Merger approval delays add to costs Remgro

• Group on delisting crusade awaits competition watchdog approval for its multibillion-rand takeover of Mediclinic

Remgro, on the verge of taking private hospital group Mediclinic private, expressed frustration on Thursday at how long SA competition authorities take to approve M&A deals.

The group, controlled by Johann Rupert, recently clinched a deal to sell its controlling stake in Distell to Dutch brewing giant Heineken. The Distell and Heineken tie-up first announced in November 2021 was given the green light by the Competition Tribunal two weeks ago.

Remgro, which has been on a delisting crusade, is also awaiting approval from the competition watchdog for its multibillion rand takeover of Mediclinic. The group already owns 44.56% of Mediclinic. In partnership with Mediterranean Shipping Company, Remgro offered £3.7bn in 2022 to acquire the rest of Mediclinic and delist it from the JSE.

The Competition Tribunal heard the matter last week. The necessary approvals are expected any day now. Business Day understands the merger was approved and an announcement will be made soon.

CEO Jannie Durand said delays in approving such deals was frustrating. “The approval should have been a lot quicker. There were no competition concerns at all raised (in the Mediclinic deal); all things we were dealing with were public interest matters. We had to get approvals from Switzerland, the UAE and in Cyprus, I don’t know why we had to get approval from Cyprus but we had approvals from these jurisdictions for months. The only regulatory authority that took so long was the SA side,” Durand told investors in a conference call after the release of the group’s interim results.

“There are a lot of frictional costs in having these transactions delayed.”

Icasa in November approved Vodacom and CIVH’s proposed fibre merger, bringing the deal closer to completion. The transaction, which was first announced in late 2021, remains subject to Competition Commission approval. Remgro-owned CIVH recently formed a new infrastructure company as part of its R13bn deal announced in 2021 to merge its Vumatel and DFA units with Vodacom’s fibre assets to create one of the largest SA fibre companies.

Remgro’s largest investments include its 44.6% stake in Mediclinic, its 30.6% stake in Outsurance, its 31.7% stake in Distell, its 80.2% stake in RCL Foods and a 24.9% stake in TotalEnergies. The intrinsic net asset value of Mediclinic, Remgro’s biggest asset, grew 12.8% to R33.36bn.

The Stellenbosch-based group has in recent times looked to change the composition of its portfolio, with more emphasis on unlisted investments. Durand lightened the benefits of taking companies private, saying it gives it better control of entities it owns and brings it closer to their management teams.

“Operating in the unlisted space gives us better control of the investments and execution is easier to achieve. It allows us to be closer to the teams and have flexibility. It also puts more responsibility on Remgro to be more transparent and disclosures must be better to allow the market to put value on those investments.”

Remgro reported an improved intrinsic NAV, its main performance measurement, and upped its dividend amid tough economic conditions and significant changes to its portfolio.

The company, valued at R69bn on the JSE, said in its results for the six months to end-December that intrinsic NAV rose 5.05% to R223.86 per share over the previous six months and total intrinsic NAV after tax advanced 4.7% to R125.9bn. It declared an interim dividend of 80c per share, up 60% year on year. Headline earnings improved 5.5% to R3.53bn and headline earnings per share 5.7% to 626.2c.

Global economic uncertainty continued in the second half of 2022 as the war in Ukraine dragged on, commodity prices went up, inflation remained high and interest rates were hiked.

This was worsened on home soil by higher stages of loadshedding as 2022 was the worst year on record for power cuts, infrastructure challenges, slow economic progress and GDP contraction of 1.3% in the fourth quarter. To deal with these headwinds, Remgro ensured that their businesses were well capitalised.