Rem­gro placed at the top of SA con­glom­er­ates

The Star Early Edition - - COMPANIES - Ka­belo Khumalo

REM­GRO, the R113 bil­lion in­vest­ment ve­hi­cle con­trolled by the Ru­pert fam­ily, has en­joyed high­profit re­ten­tion over the past 20 years, with its share­hold­ing in Medi­clinic, FirstRand, Rand Mer­chant Bank (RMB) and Rand Mer­chant In­vest­ment Hold­ings (RMI) prov­ing par­tic­u­larly prof­itable for the group.

The Cen­tre for Com­pe­ti­tion, Reg­u­la­tion and Eco­nomic De­vel­op­ment (Ccred) yes­ter­day said that the value of Rem­gro’s highly di­ver­si­fied in­ter­ests held over a long pe­riod placed the com­pany at the top of the South African con­glom­er­ate groups.

The Ccred said the ag­gre­ga­tion of Rem­gro’s prin­ci­pal in­vest­ments as at De­cem­ber 31, 2015, gave it in­flu­ence over firms with a to­tal mar­ket cap­i­tal­i­sa­tion of R1.3 tril­lion. It said this rep­re­sented 12 per­cent of the to­tal mar­ket cap­i­tal­i­sa­tion of the JSE.

“This in­creases to ap­prox­i­mately 27 per­cent when in­clud­ing the to­tal cap­i­tal­i­sa­tion of Bri­tish Amer­i­can To­bacco (BAT) in which the com­pany, through Reinet In­vest­ments, holds shares,” the Ccred said.

Last month, Reinet said its in­vest­ment in the to­bacco maker grew to 70.8 per­cent of the net as­set value as of the end of March fol­low­ing BAT’s $49bn ac­qui­si­tion of Reynolds Amer­i­can ear­lier this year.

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

The Lux­em­bourg-based Reinet was cre­ated in 2008 with the un­bundling of the Rem­gro-Richemont-BAT group. Jo­hann Ru­pert serves as chair­per­son of Rem­gro, Richemont and Reinet.

Ma­jor in­ter­ests

Ccred said Rem­gro’s ma­jor in­ter­ests in its port­fo­lio in­cluded a 25.8 per­cent stake Unilever South Africa, a 31 per­cent hold­ing in Dis­tell, a 77.5 per­cent share in RCL Foods, a 42 per­cent stake in Medi­clinic and a 28.2 per­cent hold­ing in RMB Hold­ings. It said this meant that Rem­gro had di­rect in­ter­ests and in­flu­ence in nine firms in the JSE Top 100 firms by the end of 2015.

It said Rem­gro had 29 sig­nif­i­cant in­vest­ments in listed and un­listed com­pa­nies, in­clud­ing a sig­nif­i­cant stake in eMe­dia, the own­ers of e.tv and To­tal South Africa.

Ccred said this was in­dica­tive of an ap­proach to ex­tract div­i­dends and prof­its from in­vestee firms to fi­nance its own ad­di­tional in­vest­ments rather than that of its in­vestee firms.

“Over the pe­riod un­der re­view, Rem­gro’s rev­enue in­creased 116 per­cent, sim­i­larly earn­ings be­fore in­ter­est and tax also grew 202 per­cent. Over­all, key con­trib­u­tors to Rem­gro’s net prof­its are Medi­clinic, RMB, RMI and FirstRand.”

Rem­gro’s share­hold­ing in Medi­clinic has re­cently come un­der the spot­light. In May, a re­search note pub­lished by the Com­pe­ti­tion Com­mis­sion’s in­quiry into cross-di­rec­tor­ships and cross-own­er­ships in the pri­vate health­care in­dus­try said the size and breadth of Rem­gro’s and Afro­cen­tric’s fi­nan­cial in­ter­ests in the pri­vate health­care in­dus­try could sti­fle ef­fec­tive com­pe­ti­tion in the sec­tor. Afro­cen­tric owns Med­scheme hold­ings, a med­i­cal scheme ad­min­is­tra­tor.

Rem­gro’s chief ex­ec­u­tive, Jan­nie Durand, sits on the boards of Medi­clinic, and the FirstRand Group, which has shares in MMI Hold­ings.

Ccred said Rem­gro’s in­vest­ment in un­listed firms sug­gests an ap­petite in Rem­gro to in­vest “op­por­tunis­ti­cally” in en­trant firms in strate­gic sec­tors and make long-term com­mit­ments.

“There is also a con­cern that th­ese firms may es­tab­lish po­si­tions of mar­ket power in the sec­tors in which they op­er­ate, with the po­ten­tial to re­duce the like­li­hood that new, par­tic­u­larly black-owned en­trants, could con­test th­ese mar­kets in fu­ture.”

PHOTO: JEF­FREY ABRA­HAMS

The head of Rem­gro, Jo­hann Ru­pert, at his in­au­gu­ra­tion as chan­cel­lor of Stel­len­bosch Univer­sity. Rem­gro’s highly di­ver­si­fied in­ter­ests placed it at the top of South African con­glom­er­ates.

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