Ceding control

It appears the cloak of control at Rex Trueform, which operates the Queenspark chain, has been lifted. It’s not easy to discern the clear lines of control at Rextru because of an archaic pyramid control structure via African & Overseas Enterprises (Af&over) as well as a low-voting Nshare structure at both companies. But directors’ share dealings detailed last week suggest that control of Rextru has passed from the Shub family to a consortium anchored by former Hosken Consolidated Investments chairman Marcel Golding and low-key investor Hugh Roberts.

The details show Golding’s Geomer Investments and Roberts-aligned investment entities forking out R65m to members of the Shub family for 726,600 Af&over ordinary shares, 604,045 Af&over N-shares, 1,241 Rextru ordinary shares and 4,058 Rextru N-shares. Before this transaction, the Golding-roberts consortium held by far the biggest economic stake in Rextru. But the pyramid structure and Nshares ensured the Shub family retained voting control.

Based on the last annual report, it would seem the Shub family has sold practically all its Af&over ordinary and N-shares. Considering Af&over speaks for 2.1m or 73% of Rextru ordinary shares and 9.2m N-shares, it seems safe to assume the consortium is now large and in charge. The big question is whether it will push for a radical makeover of Rextru, which has been conservatively run for the past two decades. Rextru is small enough to add smaller retail formats that could bring meaningful diversity to the operating base. It is also a convenient size to serve as a corporate conduit, should a major international retailer want to break into the SA market.

The other story doing the rounds is that the Golding-roberts consortium may use Rextru and Af&over as empowerment investment vehicles to compile a diversified portfolio of operating assets.

With an underutilised balance sheet at Rextru, the latter seems realistic.

Cold on Gold

It’s not even 18 months since fast-food franchiser Gold Brands Investments listed on the JSE, and already there is a worrying reek emanating from its financial statements. The company’s results to end-february indicate that the net loss of R48m has meant current liabilities exceed current assets by almost R18m. Operational cash flows turned negative to the tune of R6.5m — a rather alarming turn considering the cash-spinning prowess of larger counter-mates, such as Spur Corp and Famous Brands. The real stomach turner, however, was the admission around an ongoing policy to assist first-time business owners and grow entrepreneurs as part of its growth strategy. I quote: “To this end the group has in the past been too lenient on nonpaying franchisees . . .”

If Gold Brands now has to play hardball, it might well stress the relationship between franchiser and franchisee — possibly irreparable in these lean times. Much like predecessors O’hagan’s and Kingco, whose growth recipe also flopped shortly after listing, Gold Brands finds itself fighting for crumbs.

Fortifying control

The overdue collapsing of the Capevin holding company structure has been welcomed as beneficial to Distell. Capevin’s prolonged existence as a holding company with a sole investment in Distell was clearly untenable. There are hopes now that Distell shares will trade more freely on the JSE and that the firm can more nimbly pursue its global growth ambitions.

Not entirely unexpected are the first dissenting whispers around the transaction — specifically around investment company Remgro gaining voting rights incommensurate with its roughly 32% shareholding in Distell. Artificial control is frowned on by the JSE these days, but large Distell/capevin shareholders such as the Public Investment Corp and Coronation have agreed to this structure.

Presumably they are confident Remgro will play a key role in uncorking value at Distell.

The clear lines of control at Rextru are not easy to discern due to a pyramid control structure via Af&over