Keeping it in the family
The JSE has had its fair share of family owners, from the Ruperts to the Ackermans, Motsepes and Moutons. Not all have happy endings; we round up those that might
The fortunes of the family-owned business can be fickle, fascinating, frustrating and sometimes even fulfilling.
Globally there are standout familyowned firms Walmart, BMW, Tata and Samsung and the JSE has, since its early days, played host to great dynasties. The big mining houses were built by such families as the Oppenheimers, Hersovs, Menells and, more recently, the Motsepes.
Great and hugely rewarding investment empires were built by the Ruperts, Gordons and Moutons. Family owners spawned ventures such as Toyota South Africa (founded by Albert Wessels), Altron (Bill Venter), Famous Brands (the Halamandres family), Spur Corp (Allen Ambor), Sasfin (Sydney Sassoon), Rex Trueform (Bernard Shub), Shoprite (Christo Wiese), Italtile (Giovanni Ravazzotti), Nu-World (Goldbergs), Clientèle (Enthovens), Assore (Guido Sacco), Caxton & CTP (Terry Moolman and Noel Coburn), Brimstone (Fred Robertson and Mustaq Brey), TFG (Lewises), Bowler Metcalf (Horst Sass) and Ellerine Holdings (Sydney and Eric Ellerine).
Of course, there have been underwhelming bouts of family ownership too. Think York (under the Tuckers), Gooderson Leisure, Cadiz, Mathieson & Ashley, Seardel, Rentsure, Rainbow Chicken, MAS Holdings, Hicor, Aroma Liquor Holdings, WG Wearne, Spanjaard and Mazor (to cite just a few).
In recent weeks investors would have seen the contrasting fortunes of two of the best-known family businesses on the JSE Pick n Pay and Textainer (Trencor), which respectively have the Ackerman and Jowell families as original parents.
Pick n Pay seems to have been panicked into dramatic leadership changes to restore its shredded margins. Many maintain that the extended period of Ackerman family control which essentially precludes any hostile advances has left Pick n Pay with a soft underbelly, and that radical changes are needed to make the business competitive again. Former CEO Sean Summers has returned, but awful results mean Pick n Pay shares have cratered more than 30% since midOctober alone.
Textainer, on the other hand, has produced a happy ending. Spun out of Trencor, the company initially appeared to suffer from the complacencies of long family ownership missing out on corporate action in the container leasing market that might have built compelling scale. However, it’s now been bought out by a specialist private equity firm for a sizeable premium.
Whether a revamped Pick n Pay will meander its way to a similar outcome is difficult to predict.
But how do investors assess opportunities in family businesses aside from backing the steady-eddies such as Remgro, Sabvest or Italtile?
There are various issues to consider most importantly how a family business is managed across the generations.
It’s not a gross generalisation to argue that the first generation of family owners will be hungrier for success than those that follow. Collecting dividends and generous pay packages might be far more convenient than strenuous strategic changes, say.
Such was the case at Rex Trueform, which did its best to frustrate major shareholder Brimstone. Still, the Shub family finally capitulated to former Hosken Consolidated Investments executive Marcel Golding. That’s resulted in the business morphing from a niche retailer into a broader investment company.
Graeme Körner, director of Körner Perspective, says successful family businesses recognise when they don’t have the skill, the interest or the capacity to continue building shareholder value.
“The first generation make it and the second generation nurse
the business. The third generation sometimes put it up their noses or drive it into walls.”
He says the most successful family businesses recognise that second- and third-generation transition risk and manage this carefully.
“Someone like Johann Rupert, in terms of stewardship of the family wealth [in Remgro,
Richemont and
Reinet], has done a very good job over an extended period.
Though he is very different to his father, Anton, he was probably the right person to take it over.”
Des Mayers, senior analyst at
Afrifocus Securities, says some solace can be taken when family money is on the line. “This is critically important, particularly so in today’s climate where many professional managers are so well rewarded but have no skin in the game. They can sail off into the sunset with a retirement package for life, which is paid for by the general body of shareholders and often bears no relationship to what they contributed to the company.”
So which family-owned businesses are worth monitoring on the JSE?
Nu-Worl
the family of founder and dominant shareholder Ronnie Katz. Over five years the share price is more or less flat. Katz is now in his 80s but shifted from executive chair to CEO in 2018. A merger with Primeserv or the recruitment arm of private education group AdvTech might create the scale and strategic shift that could elicit more market interest. Otherwise, Katz could pitch an offer to the few remaining minorities and delist the business. It generated 46c a share in earnings in financial 2022. Workforce has a NAV of more than 400c a share nearly R1bn against the current market value of just over R300m.
Blue Label Telecoms
The Levy brothers have battled hard to sort out a difficult investment in Cell C and have not shirked from some serious recapitalisation efforts. Cell C is still churning encouraging numbers in its traditional prepaid businesses. One thing to watch is the strategic partnership between Cell C and Capitec, following global fintech trends. The Blue share price oscillates in an uncertain wedge, reflecting local investor scepticism. International fintech investors might see the situation differently and share the Levy brothers’ longer-term vision.
Master Drilling
This feisty family business, controlled and managed by Danie Pretorius, suffers from a lowly rating that does not reflect solid operational performances. Master Drilling trades on a 4.75 trailing earnings multiple and a 3.78% yield. Investors seem to ignore a revenue pipeline of $517m and a committed order book of $276m. While Master Drilling could clearly press on, its geographic span and technical expertise could attract interest from global mining services outfits. Of course, Pretorius has to see merit in such strategic tie-ups and perhaps the temptation to take Master Drilling private would be stronger. In hard currency, its market value is just over $100m.