No related party issues at Remgro
JSE comfortable, Theo Botha perplexed
T HE JSE DISMISSED suggestions last week that related party issues in the restructuring of Rupert familycontrolled investment group Remgro had been overlooked. Shareholder activist Theo Botha first raised concerns about related party issues in Remgro’s restructuring ( Finweek 16 October “Bad times could be good for Reinet”) earlier this month.
Botha, who questioned Remgro chair Johann Rupert at length at a recent shareholders’ meeting earlier in October, questioned why the unbundling and listing of new investment vehicle Reinet Investments was not flagged as a related party transaction. On paper, Botha seems to have raised a valid point, with Rupert (the chairman of both Remgro and Richemont) chairing and controlling Reinet Investments as well as chairing and controlling its investment advisory company, which earns a fee on assets accumulated and a performance fee on cumulative returns.
Initially, Reinet’s biggest investment will be a 3% shareholding in British American Tobacco (BAT), garnered from 10% of the BAT shares due to be unbundled to Remgro and Richemont shareholders. CF Rupert and the Rembrandt Trust – both controlled by the Rupert family – are also listed as the underwriters of new Reinet shares to be issued in a rights offer. Rupert, at the recent Remgro shareholders’ meeting, acknowledged there could be questions about related party issues. However, he indicated that Remgro’s advisers had assured him that – legally – that wasn’t the case.
Nevertheless, Botha petitioned the JSE about Rupert’s related party concerns, suggesting the matter could set a precedent for other listed companies. He said other listed companies might be able to skirt related party issues by pointing to the Remgro restructuring as a precedent-setting transaction.
However, Finweek is in possession of corre- spondence sent to Botha from JSE GM of issuer services Doug Doel that makes it clear the SA bourse is satisfied with developments at both Remgro and Richemont (which began its unbundling process last Monday).
Doel says prior to the restructuring, Remgro held a one-third interest and Richemont a two-thirds interest in the joint venture R&R Holdings, which, in turn, held a 30% stake in BAT. Doel says that, as part of the transaction, Richemont and Remgro distributed 90% of their respective holdings in BAT to shareholders, leaving the remainder in R&R, which was collapsed into Richemont SA to become Reinet Investments.
Doel says post the restructuring, Remgro continues to hold one-third of the new R&R (ie, Reinet) with Richemont holding the other two-thirds. Following the distribution of Remgro and Richemont’s respective 90% BAT shareholdings there’s an effective 3% interest in BAT left in Reinet.
Doel concludes that since Remgro shareholders, after the restructuring, are in the same position with regard to their investment in R&R/Reinet as they were before the restructuring, the JSE treated the transaction as “one indivisible restructuring”. He says that didn’t fall within Section 10 of the JSE’s listings requirements “as opposed to a series of transactions”.
Botha isn’t impressed by the JSE’s statement, asking whether Doel’s argument would stand up in a court of law. Botha reckons the prospectus for Reinet Investments identified a slew of related parties with which it had entered into material