Remgro now even more unimaginative
REMGRO’S SECOND ATTEMPT to take over VenFin, which it unbundled donkeys’ years ago, confirms the senior decision-makers in Stellenbosch are becoming increasingly unimaginative. In 2000 VenFin was unbundled from Rembrandt, with the specific instruction to co-ordinate the group’s IT interests and develop value. The two main (IT) investments made by VenFin over the following five years were to lend Alexander Forbes and Dimension Data US$100m each. Neither of those management decisions produced any value for shareholders.
For most of its life on the JSE, VenFin was a disappointing investment. By 2004 the sale of the group’s 15% interest in Vodacom for a not insignificant sum suddenly gave its directors and management at Stellenbosch considerable reason to congratulate themselves on the substantial value they’d unlocked for investors. However, VenFin was never in any way involved in Vodacom’s management and successes. It merely reaped the fruits of a good investment – and that’s the larger group’s secret of success.
After the sale of its interest in Vodacom, VenFin crawled even more deeply into its Stellenbosch shell. The listing was suspended and only the Rupert family was entitled to buy the unlisted VenFin shares that other investors no longer wanted to hold. It looked very much as if the motivation was that it had become time for the Rupert family to create wealth for itself by not always giving everything away to investors. After all, original 1950 investors in Rembrandt are now all millionaires.
The smaller VenFin without Vodacom unlocked very little new value for loyal investors over the past five years. Relying on the calculations of my colleague Marc Hasenfuss that was at best an increase in its price from R14 to R22/share.
Shoprite’s Whitey Basson, at his office in Parow – considerably lower down the Cape status ladder than Stellenbosch – did much more for his shareholders over the past decade.
The latest proposal on the table is that Remgro should again take over VenFin’s old assets, with the exclusion of the loan/investment in Didata. And that’s at asset value for asset value.
That means the considerably larger discount at which VenFin is trading to its book value in relation to Remgro’s far smaller discount will immediately unlock substantial value for VenFin’s shareholders (read Rupert).
As a shareholder in Remgro I have no interest at all in any of the unlisted assets Remgro will now acquire from its takeover of VenFin. Though a few of those assets could perhaps be attractive on their own, to develop them requires management and entrepreneurship. Not much along that line has been developed in Stellenbosch over the past decade.
All honour to the Ruperts and the management of the larger Rembrandt group. Over the past decade or two they’ve negotiated some excellent investments, such as the 15% in Vodacom and the large interest in RMBH and FirstRand in SA. The investment moves that eventually led to the large interest in British American Tobacco also constitute one of the smartest business achievements ever in SA. On the management and entrepreneurship side it’s probably unnecessary to look any further than the many decades of plodding along with Rainbow’s broilers.
My list, in order of preference for the old and new Rembrandt groups – and I hold shares in all of them – is still as follows:
BAT, Reinet, Richemont and Remgro.
Igniting a new opportunity? Johann Rupert