SABMiller to sell Distell stake within 3 years

SABMILLER’S 26 percent stake in South African wine, beer and spirits producer Distell is up for sale, with market speculation around possible suitors.

On Tuesday, the world’s largest brewer Anheuser-Busch InBev (AB InBev) was given conditional approval for its $106 billion (R1.57 trillion) acquisition of SABMiller by the Competition Commission, on condition that SABMiller sold its Distell stake within three years of closing the deal.

Distell said in a JSE Sens statement yesterday: “As SABMiller does not have any representation on the board of Distell and has never been involved in the management of Distell, the disposal will not impact the way Distell operates.”

It said it would work closely with all parties involved to ensure “the most appropriate outcome for its shareholders”.

Analysts expect the disposal of the stake to happen faster than the Competition Commission’s specified three years as Distell is a good company and an attractive acquisition.

Distell owns Three Ships Whisky, Amarula, Bain’s Cape Mountain Whisky and ciders such as Savanna and Hunters Dry. Its brandy portfolio consists of Klipdrift, Richelieu, Oude Meester and Van Ryn’s. Distell is estimated to be worth more than $559 million and has a market capitalisation of more than R34bn.

Dirk Steyn, a portfolio manager at Mergence Investment Managers, said: “From the shareholding analysis it would seem that Remgro would be the most obvious candidate to acquire the SABMiller stake in Distell. But this would increase Remgro’s interest to 57 percent, higher than the 34.5 percent threshold that would force Remgro to take out minorities.

“If Remgro does not have appetite for this, it might limit its stake to 34 percent and work with the other asset managers including Coronation, the Public Investment Corporation and others,” he said.

Steyn said another possibility was that Zeder Investment might make an offer for the Distell stake as it had a strong backer in PSG Group, which might see this as an opportunity to get a meaningful stake in Distell. He said the companies had a long history of working together.

Sasha Naryshkine, an analyst at Vestact said the companies had a lot of time to get the merger right. “I mean three years is a very long time and I don’t see anything happening until the deal is concluded. The most important aspect here to look at is the time frame – which is three years – it feels like a lifetime in the markets and I am not surprised the share prices hardly reacted to the news.”

Distell share prices rose 2.89 percent to close at R156.88 yesterday.

Naryshkine said the Distell stake shouldn’t take too long to dispose of because it was very small compared with what AB InBev would be worth once the merger had been approved.

Remgro and Capevin Holdings, indirect shareholders in Distell, said yesterday that they would wait for SAB-Miller’s response to the “aforesaid condition and, with due consideration to the rights they have, act in the best interest of Remgro, Capevin Holdings, Distell and their respective shareholders”.

Remgro-Capevin Investments has a 53 percent controlling stake in Distell. Remgro Capevin Investments is 50-50 owned by Remgro and Capevin Holdings (via a 100 percent subsidiary Capevin Investments).

“In my opinion Distell is a quality company, but on the expensive side with a historic price to earnings ratio of 21,” said Steyn.

The price to earnings ratio is a market prospect measure that calculates the market value of a stock relative to its earnings by comparing the market price per share with the earnings per share.