Cigars out for Reinet as BAT flies into fold

The Star Early Edition - - BUSINESS REPORT - Ka­belo Khu­malo

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.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.