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More British American Tobacco shares might be sold by Reinet

By Kabelo Khumalo Time of article published Nov 17, 2017

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JOHANNEABURG - Reinet Investments, the Luxembourg-based Rupert-family investment vehicle, said yesterday it might sell further British American Tobacco (BAT) shares or use such shares to secure additional financing facilities from time to time.

The company’s share price shed nearly 2percent on the JSE yesterday after it released its interim results, but closed the day at R30.39.

The group’s investment in BAT remains its single largest investment position, with the firm holding 68.1million shares in BAT, representing some 2.97percent of BAT’s issued share capital.

The company said the decrease in its net asset value of 604million (R10.26billion) during the six months to September was mainly due to the decrease in value of the investment in BAT in the period.

“The BAT share price has been volatile during the current period, with an initial increase in price following the completion of the acquisition of the remaining 57.8percent of Reynolds American.

“But (it was) subsequently decreasing following the announcement of the US Food and Drug Administration’s decision to pursue regulation that requires nicotine in cigarettes to be reduced to non-addictive levels,” Reinet said. BAT’s $49billion (R704.87bn) acquisition of Reynolds earlier this year was seen as a final consolidation act in the tobacco industry.

The deal also saw BAT becoming the largest listed tobacco company in the world, leapfrogging Philip Morris International. The deal further took BAT back into the US market after a 12-year absence. Reinet said it had received dividends amounting to 138m from BAT in the six months to September, comprising BAT's final 2016 dividend and interim 2017 dividend.

The group’s net asset value as at September 30 decreased from 6bn to 5.3bn, a slide of 10percent from March. The group on Tuesday listed its ordinary shares on the Euronext Amsterdam. The company said that the listing would grant the investors in the company access to another market trading platform, which should make it easier to trade in the group’s ordinary shares.

Reinet was created in 2008 with the unbundling of the Remgro-Richemont-BAT group. Johann Rupert serves as chairperson of Remgro, Richemont and Reinet.

The group said it had entered into a £500m (R9.47bn) medium-term financing arrangement with Merrill Lynch International earlier this year, which runs until 2022. Reinet said the £500m financing transaction included the purchase by Reinet of put options over 15.5million BAT shares for a premium of some 92m, payable over the life of the transaction.

“Medium-term bank borrowings of 642m will be settled by the exercise of put options over BAT shares or the proceeds of the sale of BAT shares, or may be rolled over or replaced by other borrowings or settled by available cash.” The company also borrowed R443m to fund its investments in South African projects.


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