Newly attractive to investors, Distell eyes growth

Newly attractive to investors, liquor group eyes growth

● Stellenbosch liquor giant Distell hopes to fortify acquisitive growth prospects following a long-anticipated relisting of the company without its convoluted control structure on the JSE on Friday.

Distell — owner of bestselling brands Fourth Street, Nederburg, Savanna, Hunters, Klipdrift and Amarula — was “relisted” after the collapse of its archaic ownership structure embedded in Capevin Holdings.

Capevin held a 29% stake in Distell as its only investment, and served no purpose other than passing on Distell’s dividends to its shareholders.

The process was a prolonged affair, taking nearly a year to finalise.

Although the relisting was essentially a ceremonial exercise with no real changes to the operational assets that were originally listed under Distell, there could be key implications over the longer term.

One tangible change is that the company sheds its Distell tag — which dates back to the merger of Distillers Corporation and Stellenbosch Farmers Winery in the late 1990s — in favour of Distell Group.

The immediate impact of the collapse of Capevin for investors is that the new-look Distell Group sees the free float in its issued shares increasing markedly, from 19.5% to 37.5%. The main shareholders are Stellenbosch investment giant Remgro (a 31.4% holding plus voting control), the Public Investment Corporation (which last year acquired SABMiller’s stake in Distell), and large asset manager Coronation Fund Managers (which held a large stake in Capevin).

Shareholders will hope the new-look group can convince the market it has spirited long-term growth prospects. The Distell share has drifted from an all-time high of around R178 in late 2015 to around R121.

Distell Group MD Richard Rushton said the boost in the general marketability of the company’s stock would be a boon to local and international investors, with a single entry point to invest in the company.

More importantly, Rushton noted, the simplification of the shareholding structure should improve the company’s ability to raise additional capital if required to fund growth ambitions.

Distell has in recent years broadened its global reach with the acquisition of whisky specialist Scottish Leader. But lately African expansion — both organically and by acquisition — has been emphasised.

“These are good times for Distell. We’ve been resilient in a tough economy, and our African expansion ambitions are supported by the board.”

Remgro CEO Jannie Durand said the investment group was fully supportive of Distell’s growth plans. “Finally having the simpler structure is a great relief. The market can now understand Distell, and it will be much easier for the group to raise capital to pursue acquisitions.”

Chris Logan, CEO of Opportune Investments and longtime Distell shareholder, said the (re)listing marked the end of an archaic control structure that dated back to 1979 when 30% shareholder KWV and 30% shareholder Rembrandt (now Remgro) merged their interests into a holding company that controlled 60% of Distell.

While Distell’s holding company control structure served its purpose in shutting out the old SABMiller (a 30% shareholder), Logan believed the structure prevented Distell from utilising its scrip to make value-enhancing acquisitions.

“It also made Distell incredibly insular, none of which mattered to most shareholders until the company’s explosive growth in its cider brands ended in 2014.”

Logan said the appointment of Rushton — previously an SABMiller executive — as CEO at Distell in November 2013 meant the “negative issues” around the control structure were open for discussion.

“Rushton awakened Distell — whose market capitalisation is only R28-billion — to the reality that it was a very small company competing with giants like ABInBev (with a market cap of R2-trillion), Heineken (market cap R730-billion), Diageo’s market cap of R1.1-trillion and Pernod Ricard’s market cap of R570-billion.”

Rushton told Business Times increased competition from liquor multinationals was a fact of life, especially with regard to challenges to Distell’s dominance in the local cider market by non-traditional beer offerings from ABInbev and Heineken.

“We were never going to have it our own way, and we will probably lose some market share. But we are responding strongly. Increased competition from multinationals will bring out the best in us.”

Our African expansion ambitions are supported by the board

Richard Rushton

Distell Group MD