Imperial buys another 11% in Renault SA

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Roy Cokayne

Imperial Holdings has acquired a further 11 percent shareholding in Renault South Africa for R65 million to increase its shareholding in the joint venture with the French car manufacturer from 49 percent to 60 percent.

Hubert Brody, the chief executive of the listed transport and mobility group, said last week the transaction gave Imperial a controlling stake in the joint venture once again.

Brody said the rationale for the acquisition was that Imperial believed for Renault to be best positioned in the South African market, it was better for the brand to be managed by a South African management team than from Paris.

He was confident the acquisition and Imperial regaining management control of the brand would benefit Renault.

“Our level of local knowledge is strong and we can also combine Renault’s volumes, parts warehouses and all the support it requires and run it off our current infrastructure. So there are very definite cost efficiency benefits out of that as well,” he said.

Brody added that in addition to the R65m purchase price, certain existing funding obligations of the company had been rolled into a new funding structure.

The acquisition led to the appointment in December of Niall Lynch as managing director of Renault SA. Lynch, the only son of the late former Imperial Holdings chief executive Bill Lynch, succeeded Susumu Uchikoshi. Brody said the acquisition of the additional shareholding in Renault SA was finalised a few weeks before Lynch’s appointment.

The acquisition followed Imperial in February 2010 reporting that it had increased its investment in the joint venture by increasing its convertible interest-bearing debenture in Renault SA by R150m to a total of R220m after writing off its entire investment in the partnership in 2008.

This followed Imperial incurring a R70m loss in the year to June 2008 as its part of the loss in the venture.

The joint venture between Imperial and Renault was established in 2002 when the French car manufacturer acquired 51 percent of XDSL Trading 219, a wholly owned subsidiary of Imperial Car Imports that was the importer and distributor of Renault passenger and commercial vehicles in South Africa.

Renault invested R100m to acquire the stake in XDSL Trading 219, which was subsequently renamed Renault SA.

Renault SA posted growth of 18.5 percent in passenger car sales last year compared with the industry’s volume growth of 1.8 percent.

The joint venture falls into the automotive and industrial business pillar in the Imperial group, which increased its revenue by 8 percent to R31 billion in the six months to December, while its operating profit fell by 7 percent to R1.7bn.

Brody said the automotive business experienced some pressure because of the weakness in the rand exchange rate.

Apart from Renault, Imperial is the importer and distributor for a number of other vehicle brands, including Hyundai, Kia, Tata, Mitsubishi and Daihatsu.

The overall Imperial group, including its logistics and financial services business pillars, grew its revenue by 13 percent to R51.36bn and operating profit by 8 percent to R3.16bn in the six months to December. Headline earnings a share were flat at R8.31, largely because of the impact of a once-off R70m charge for amendments to conversion profile of shares issued to its empowerment partner Ukhamba.

Shares gained 3.96 percent to R169.50 on the JSE on Friday.


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