Cigars out for Reinet as BAT flies into fold

BRITISH American Tobacco’s (BAT) $49 billion acquisition of Reynolds American earlier this year has added gloss to Johann Rupert-controlled investment vehicle Reinet Investment’s net asset value, with its investment in BAT now constituting 70.8 percent of its net asset value as of the end of March.

The company, in its annual report released on Friday for the year ended March, said the increase in the net asset value of 781 million (R11.7bn) during the year was influenced by the receipt of dividends from BAT. Reinet has a market cap of more than R58m.

The group’s net asset value increased by 15 percent to around 6bn in the period under review.

Rupert, who serves as the company’s chairman, said in the annual report that the group’s decision to maintain a strong position in BAT during the year under review has proved to be the correct one as its investment in BAT now represented 70.8 percent, up from 67.3 percent a year ago.

“Last year, BAT made a proposal to acquire the 57.8 percent of Reynolds American, which it did not already own. This, along with strong earnings, excellent growth across all business metrics and sterling depreciation, contributed to the significant increase in its share price. This reflects the significant increase in the BAT share price from £40.90 to £53, the value of the holding of 68.1 million shares increasing to 4.2bn at March 31, 2017,” Rupert said.

Reinet holds 68.1 million shares in BAT, representing 3.7 percent of BAT’s issued share capital.

BAT the biggest

BAT’s acquisition of Reynolds, which was seen as a final consolidation act in the tobacco industry, saw BAT, which has held a 42 percent stake in Reynolds since 2004, becoming the largest listed tobacco company in the world, leapfrogging Philip Morris International.

The transaction united Dunhill, Rothmans and Camel cigarettes, and added a key e-cigarette element to its portfolio.

Last week, BAT announced that both BAT and Reynolds shareholders had approved the transaction and expected it to be completed tomorrow.

Tobacco companies have spent billions of dollars in recent years as they jostle for a superior market share of the lucrative e-cigarettes market.

According to Bloomberg Intelligence, the e-cigarette and vapour market is expected to be worth $15bn by 2019, a massive jump from its $5.2b value in 2015.

Reinet said it increased its total commitments by 213m and invested 290m in new and existing portfolio assets in the year. It had also received dividends from BAT during the year amounting to 127m, while it borrowed R443m in the period to fund its investments in South African projects.