The Ruperts, the South African billionaire family that started a global tobacco business more than 76 years ago, effectively exited the industry on Tuesday after Johann Rupert’s investment company sold its shares in British American Tobacco (BAT) for £1.22 billion (R28.19bn).
Reinet Investments said on Tuesday that its indirect subsidiary, Reinet Jersey Holdings (RJHL) would sell over 43.3 million shares in BAT at £28.20 a share to institutional investors.
This was completed through an aftermarket accelerated bookbuild, which started on Monday. The Ruperts will be left with a very small interest in BAT - 1.3 million BAT shares are still held by the Rupert-controlled investment group Remgro.
Peter Little, fund manager at Anchor Capital, said Reinet did not provide a reason for its exit from its investment in BAT, and the sale was"fairly out of the blue", but Reinet had been steadily decreasing its stake in BAT over a number of years, and this likely had less to do with ESG factors and more to do with Reinet's desire to invest in the future and growth rather than in industries in structural decline.
“The market seems to like it however, with Reinet shares up 8% today… From its humble beginnings in 1939, the Voorbrand Tobacco Company spawned a global business empire that today includes Remgro, Richemont, and Reinet. The group was started as a snuff tobacco company in a garage with a £10 investment… the company’s first cigarettes were manufactured in an old flour mill in Paarl during the 40s,” Urquhart Partners (@Urquhart) wrote on the X social media platform, where the transaction generated much commentary.
“Reinet Investments sells entire BAT shareholding, raking in £1.22 billion. Exiting with flair, paving the way for new investments,” The Real McCoys (@realmccoys) said.
“Would be nice if Remgro could also (like Reinet) dispose of most of its listed investments (which investors can buy directly on the JSE) and clean up its portfolio a bit,” Jaco Scholtz (@jacoscholtz) said on X.
Reinet is a Luxembourg-based JSE investment vehicle listed in Amsterdam, Luxembourg, and Johannesburg, that was demerged from the Swiss luxury goods company Richemont in 2008 and is chaired by Johann Rupert.
At September 30, 2024, the interest in BAT comprised 24% of Reinet’s net asset value. Separate from the placing, in November and December 2024, RJHL had already sold 5 million BAT shares on the London Stock Exchange, realising some £148.5m in proceeds.
Reinet said it expected to announce the December 31, 2024 net asset value of Reinet on or about January 23, 2025. In the six months to September 30, Reinet’s net asset value increased 6.6% over the previous year to €6.6bn. It represented a compound annual growth rate of 9% from March 2009 to the end of September.
Reinet said it intended to use the proceeds of the BAT share sale for its ongoing investment activity, and BAT would not receive any proceeds from the placing.
In its last financial year, Reinet received €69m in dividends from BAT, which was well down from €84m it received in 2023 and €82m in 2022.
An online search by Business Report shows that BAT’s dividends have come under pressure due to the effects on the group from the shift in consumer behaviour, with more people quitting smoking, increasing regulatory challenges worldwide, and a shift to smoke-free products such as vapes and nicotine pouches.
BAT’s largest institutional shareholders include Capital International Investors, BlackRock Incorporated, Capital Research Global Investors, GQG Partners, and Orbis Allan Gray. The single largest shareholder is Spring Mountain Investments, which is owned by US billionaire Kenneth Dart, with about 10.2% of BAT's shares.
Reinet’s share price was trading 7.9% higher on the JSE at R455.75 early Tuesday afternoon, a price well up from R313.75 three years ago. BAT’s share price fell 2.09% to R664.05, much the same value as the R662.48 that the share traded at three years ago.
Sustainalytics, an independent ESG (Environmental, Social, and Governance) and corporate governance research, ratings, and analytics firm that provides ESG risk ratings and data for over 13 000 companies globally, in October gave BAT an ESG Risk Rating of 31.1, which was assessed to be at high risk of experiencing material financial impacts from ESG factors.
BUSINESS REPORT