Marc Hasenfuss: Market Watch

questioned the value of these agreements, with ciders, its international scotch interests and a resurgent wine business now the real drivers of growth at Distell.

But it’s not just about unlocking value on the holding structure. Capevin might prove cumbersome if the proposed merger between SABMiller and AB InBev ushers in shareholding changes at Distell.

SABMiller, for reasons not entirely clear to me, still clings to a 28% stake in Distell. That stake is worth around 1% of SABMiller’s market capitalisation. Distell’s total revenue, at R20bn, is less than 5% of SABMiller’s sales. In an enlarged brewing entity, Distell becomes a really small sip.

Naturally market talk holds that an enlarged brewing giant will see little value in retaining a small stake in an SA-based liquor company. The obvious conclusion is that if the Distell stake is put up for sale then Remgro will be keen to fortify its stake.

The question was raised at a recent Remgro investment presentation when CEO Jannie Durand confirmed there were pre-emptive agreements on SABMiller’s stake in Distell.

If Remgro gains outright control of Distell (it already has a management agreement in place) then surely the Capevin structure will prove an unnecessary hindrance in efforts to expand the business.

Consider what might happen if Distell snagged a large and lucrative international opportunity. (Another Remgro subsidiary, Mediclinic, has done so to great effect.) For instance, could Distell quickly hold a rights issue without Capevin — which does not hoard cash — also having to strike out with a rights offer in order not to dilute its holding in Distell?

Quite honestly, it’s high time for this archaic and unnecessary holding structure to go, and I suggest minority shareholders resort to popular revolutionary parlance and demand “#Capevinmustfall”.