Wiese’s magic hand

Financial Mail - - COVER STORY - Hasen­fussm@fm.co.za

The stun­ning growth of in­dus­trial sup­plies gi­ant In­victa Hold­ings over the past two decades of­fers valu­able insight into how re­tail ty­coon and se­rial risk-taker Christo Wiese can help shape a com­pany’s destiny from be­hind the scenes.

Wiese, fa­mously, does not run com­pa­nies him­self — but has the abil­ity to find su­perb ex­ec­u­tives who are able to gen­er­ate con­sis­tent re­turns and ex­e­cute his strate­gic vi­sion.

In the late 1990s, be­fore Wiese emerged as the an­chor share­holder, In­victa was a niche sup­plier of equip­ment, mainly to the agri­cul­tural sec­tor. The busi­ness — where for­mer CEO and cur­rent ex­ec­u­tive deputy chair­man Arnold Gold­stone cut his teeth as fi­nan­cial direc­tor — kept a head of­fice in the Con­stan­tia winelands, and was per­ceived as a co-op­er­a­tive run by gentle­man farm­ers.

It was steady enough, with turnover in year to end-March 1997 reach­ing close to R365m and prof­its around the R30m mark.

The game-chang­ing trans­ac­tion came with the ac­qui­si­tion of Bear­ing Man in 2001. But in sub­se­quent years fur­ther im­por­tant cogs were added to the cor­po­rate ma­chine — most no­tably New Hol­land SA (2004), Doosan SA and Tile­to­ria (2007), Goldquest (2008), Wegezi and strate­gic BMG Agen­cies (2010), ESP (2011), OMSA, HPE, MacNeil and Mandirk Group (2012), Kian Ann Engi­neer­ing (2013), SA Tool (2014) and Hansen, Sibuy­ile and Hyflo in 2015.

In­victa is now a R10.2bn/year turnover busi­ness with earn­ings be­fore in­ter­est, taxes, de­pre­ci­a­tion and amor­ti­sa­tion (Ebitda) com­fort­ably clear­ing R1bn for the past three fi­nan­cial years. The quan­tum of Wiese’s orig­i­nal in­vest­ment in In­victa would have been more than paid back by the div­i­dends de­clared in the past three years, with­out even ad­ding the re­cent large spe­cial pay­out.

His big in­vest­ments Sho­prite, Brait and (to a lesser ex­tent) Stein­hoff In­ter­na­tional have a mo­men­tum of their own — and have re­in­forced per­cep­tions of Wiese as one of the smartest in­vestors on the JSE.

left the re­turns gen­er­ated by the JSE’s all share in­dex in the dust, though this is near-im­pos­si­ble to cal­cu­late due to cor­po­rate ac­tiv­ity and reg­u­lar share buy­ing.

The trans­for­ma­tion of In­victa from a niche busi­ness into an in­dus­trial pow­er­house may in­di­cate what could tran­spire at some of Wiese’s “sig­nif­i­cant pe­riph­eral” in­vest­ments — which would in­clude di­ver­si­fied in­vest­ment com­pany Stel­lar Cap­i­tal Part­ners (SCP), prop­erty hy­brid Trade­hold and com­mod­ity house Pallinghurst Re­sources.

SCP is a fledg­ling in­vest­ment com­pany, but al­ready holds large stakes in elec­tron­ics man­u­fac­turer Tel­lumat, as­set man­ager Cadiz and Torre In­dus­tries. The com­pany is also in the throes of buy­ing Pre­scient’s fi­nan­cial ser­vices busi­nesses and has pitched a takeover for cash-gen­er­a­tive se­cu­rity tech­nol­ogy man­u­fac­turer, Amecor.

There does not seem to be a spe­cific op­er­a­tional fo­cus or in­vest­ment lean­ing at the well-cap­i­talised SCP, which sug­gests a clas­sic di­ver­si­fied in­vest­ment trust in the mak­ing.

Trade­hold, where Wiese re­mains the dom­i­nant share­holder de­spite some re­cent pa­per-funded trans­ac­tions, is mainly cen­tred on a sprawl­ing port­fo­lio of UK prop­er­ties held un­der sub­sidiary Moor­garth.

But in re­cent years Trade­hold has shifted into se­cured lend­ing in the UK (via Re­ward), SA and African prop­erty (through a deal with the Collins Group) and so­lar power prod­ucts. Wiese, in­ter­est­ingly, holds a sig­nif­i­cant mi­nor­ity stake in Tex­ton Prop­erty, which holds SA and UK-based prop­erty in­ter­ests.

Trade­hold and Tex­ton are jointly in­vested in the Broad Street Mall in Read­ing, which might well sig­nal fur­ther cor­po­rate ac­tion down the line.

Wiese’s sig­nif­i­cant mi­nor­ity stake in Pallinghurst Re­sources has be­come all the more in­ter­est­ing since the re­tail ty­coon turned his at­ten­tion back to di­a­monds af­ter re­cently tak­ing a ma­jor­ity stake in over­looked Trans Hex Group.

It’s early days and Wiese, in con­junc­tion with in­vest­ment house RECM & Cal­i­bre, has only re­cently pitched a buy­out of­fer to Trans Hex mi­nori­ties. There’s no doubt Trans Hex, which has bol­stered its age­ing Orange River con­ces­sions with West Coast Re­sources (which be­longed to De Beers), needs to di­ver­sify and bulk up its gem pro­duc­tion. There are ex­pec­ta­tions that Trans Hex could look to con­sol­i­dat­ing smaller di­a­mond min­ing op­er­a­tions lo­cally and out­side SA.

A curve ball might be Wiese push­ing for Trans Hex to be re­versed into Pallinghurst, which (aside from its size­able plat­inum op­er­a­tion) holds a prof­itable in­ter­est in coloured gem­stone pro­ducer Gem­fields as well as the lux­ury brands group Fabergé. 440 420 400 380 360 340 320 300 280 260 240 220 200

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