Johannesburg - Shareholder structures that secured control of Distell in the hands of Remgro and Capevin Holdings threatened its ambitions to become a major player in the global spirits, wine and cider market, Chris Logan of Opportune Investments told the Capevin annual general meeting (AGM) yesterday.
“It is illogical that there has never been an alliance between Distell and SABMiller; one that would allow Distell to utilise SABMiller’s established route to market.”
Logan said after the meeting that while there might be competition law obstacles preventing an alliance between the two firms in South Africa, there was nothing other than the Distell control structure to prevent them co-operating in other foreign markets.
SABMiller holds a 29 percent stake in Distell and a Remgro-Capevin alliance holds 58 percent. Through direct and indirect holdings, Remgro is the largest single shareholder in Distell with 33.5 percent.
Distell’s complicated control structure, including various agreements between the major players, was put in place in 1979 in a bid to carve up the South African alcohol market and restrict South African Breweries’ (SAB’s) position to one of dominance in beer. At that stage, each of the three major players – KWV, SAB and Remgro – were given a 29 percent stake in Distell.
KWV, which has become Capevin, and Remgro pooled their holdings in what has been interpreted as a hostile move against SABMiller.
In recent years Logan has been urging the parties to unlock the Distell control structure in order to realise the global opportunities now available to South African groups.
He told the AGM yesterday that the control structure not only prevented Distell from forming an alliance with SABMiller but also prevented it from using shares to fund its global growth ambitions.
He said SABMiller had used its shares to make acquisitions, which had propelled the group to the number two position in the global beer market.
Earlier this week, at its AGM, Distell’s chairman David Nurek, discussed the group’s global ambitions, including becoming the largest cider producer in the world within the next five years.
“Imagine SABMiller, Remgro and Distell working together to develop a global business, it would be an outstanding success,” Logan said.
Capevin chairman Chris Otto told the meeting that the board was continuously looking at the Distell control structure but would not do anything that would prejudice Distell.
This was in reference to the likelihood that Distell would lose its rights over Gordon’s gin if the control structure was altered.
Logan said Gordon’s gin had been a poor performer in recent years and its loss would not be that big a blow to Distell.
Otto disputed Logan’s charge that Capevin traded at a discount of approximately 20 percent to its only asset, Distell. Otto said that if allowance was made for capital gains tax there was no discount.
Logan said: “The meeting reinforced the notion that the structure is totally outdated and that there is considerable value to be unlocked by removing Capevin.”
He added that he suspected yesterday’s AGM might have been Capevin’s last as the case against its continued existence would be too hard to defend.
Distell gained 0.45 percent to R132.59, SABMiller was up 3.98 percent to R499.40 and Capevin fell 2.6 percent to R7.50. - Business Report