In short supply
WITH PAARL-BASED wine and brandy specialist KWV Holdings firmly in play it may be a good time for smaller investors to cast their bloodshot eyes towards Stellenbosch and that great liquor edifice called Distell. Now Distell – on an earnings multiple basis – probably can’t be regarded as “cheap” – at least not as “cheap” as some pundits in the market are labelling the in-vogue KWV.
But Distell – which owns an array of liquor brands (spanning ciders and RTDs to fine wines and plonk, as well as top-selling spirits brands) – has a sound long-term performance record that warrants a superior rating… even when the robust rand is diluting export margins. And the company, even in tough trading times, usually manages to pay a stout dividend.
While Distell’s reliable, profit performances should be enough to draw investor interest from segments of the market seeking a defensive holding, Finweek believes there are much more intriguing aspects to consider when weighing up the company as a prospective investment. Its annual report shows 87,24% of Distell sits in the hands of two shareholders: Remgro/CapeVin (58,16%) and SABMiller (29,08%).
Recent developments strongly suggest Remgro – which has shifted its effective stake in Distell to more than 33% – is determined to hold the biggest tot. On the other hand, SABMiller seems awfully reluctant to let go of its strategic holding – no matter that wine and spirits aren’t core to its frothy portfolio of brands. Admittedly it’s an old arrangement (and one that’s complicated and convoluted) but something surely has to give? The logical step would be for Remgro to make a buyout offer to Capevin shareholders (both Capevin Holdings and the listed CapeVin Investments) as well as SABMiller.
It might be rewarding to be clinging to scarce Distell scrip should the ownership cocktail at this corporate be shaken and stirred. And if nothing transpires over the medium term, sit back and enjoy the dividend flows.