Old habits

Remgro is still a secret smoker — but shareholders won’t mind as BAT’s hardly been a drag

ost investors might be blissfully unaware of Remgro’s secret stash of smouldering value in British American Tobacco (BAT).

It’s common knowledge that the Stellenbosch-based investment behemoth unbundled its interest in BAT to shareholders in 2008. This process also helped launch a new investment vehicle in the form of Reinet Investments — which retained part of the coveted BAT holdings that Remgro and its corporate cousin Richemont were unbundling to their respective shareholders.

But the tobacco habit at Remgro is by no means snuffed out, and the company — via subsidiary Industrial Partnership Investments — still holds more than 1,25m BAT shares.

Investors will find no reference to this BAT holding on Remgro’s investment table on the company website. Only investors who tend to read deep into annual reports might have

Mnoticed that in Remgro’s annual report (page 67 to be exact) a reference to BAT in the context of “Investments available-forsale” — along with holdings in Kagiso Infrastructure Empowerment Fund, Pembani Remgro Infrastructure Fund and the Milestone China Fund. The quandary for Remgro is that the BAT holding is not that inconspicuous — being larger than a number of its strategic investments in its sprawling portfolio.

Remgro essentially “inherited” the holding after the BAT shares were unintentionally accrued after Remgro had embarked on exercises to buy back its own shares. The repurchased Remgro shares held in treasury consequently participated in the BAT unbundling exercise.

When BAT took a secondary listing on the JSE in 2008 the value of Remgro’s inherited shareholding was around R250m. But this has now grown