The Distell share price remained subdued yesterday after Friday’s release of a cautionary statement in which the wine and spirits company said it had entered into negotiations regarding an acquisition.
The shares, which gave up R2 on Friday before rallying R1 on Monday, ended unchanged at R114 yesterday.
A company spokesman refused to add details to the statement, which merely said the acquisition, if successful, could have a material impact on the Distell share price.
There was no indication as to whether the company was considering funding the acquisition through a rights issue or with cash.
However, one analyst noted that Distell’s complicated control structure militated against the company using equity to pay for the acquisition.
The major shareholders in the company are CapeVin, SABMiller and Remgro. They each hold a 30 percent stake.
In the company’s annual report last year, the management referred to the existence of R6.2 billion “unutilised borrowing capacity”.
The deal will be the first major acquisition by Distell since it bought Stellenbosch Farmers’ Winery in 2000.
In stark contrast to the other global players in the alcohol industry, Distell has focused on growing profits organically. To this end it has made significant headway across the globe and particularly in Eastern markets, including China, where it acquired a distribution arm.
The major progress made with this conservative organic-growth strategy is evident in the share price, which is on a price-to-earnings rating of 24 times and has been on a steady long-term upward trajectory.
Distell is the second-largest cider producer in the world, owning the Hunter’s and Savannah brands. Its spirit brands include Bisquit, Klipdrift, Three Ships and Bain.
Analysts were unsure yesterday whether an announcement by Zeder on Friday, that it had sold 133.3 million Capevin Holdings shares, was related to the Distell cautionary.
Capevin indirectly holds a 30 percent stake in Distell.
According to the Zeder announcement 94.1 million of the Capevin shares were placed with Coronation Fund Managers and the remaining 39.1 million shares were placed with Allan Gray.
The shares were placed at R6 a share, which one analyst estimated represented a 20 percent discount to the see-through value of Capevin’s stake in Distell. The total consideration for the transactions was R799.8 million. Capevin fell 1.57 percent to R6.25 yesterday.
Zeder explained that it had disposed of the Capevin shares because it could not add meaningful value at the Distell level.
“Zeder has decided to dispose of part of its investment and to utilise the proceeds in existing and/or new companies where Zeder can play a more meaningful role instead.”
Following this announcement yesterday Zeder made a partial offer for 1 million shares in Kaap-Agri, which is traded in the over-the-counter market.
The offer was pitched at R13.25 a share, which represented a 30 percent premium on Friday’s closing price.