Plod­ding along

Rem­gro now even more unimag­i­na­tive

Finweek English Edition - - Openers - VIC DE KLERK vicd@fin­

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

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