Last week’s Remgro AGM was an entertaining affair — as usual — with chair Johann Rupert reminding shareholders how lucky the group had been to switch its stake in mining group Gold Fields for banking group FirstRand.
What happened was that Anglo American (which effectively controlled First National Bank/FirstRand) wanted out of banking and Remgro (Rembrandt in those days) wanted out of mining. Though this move initially appeared to backfire, as Gold Fields enjoyed a strong run, FirstRand and parent company RMB Holdings (RMH) has been one of Remgro’s great success stories.
Rupert told the assembled shareholders that it was not prudent to have 40% of Remgro’s portfolio value in an investment where the group no longer carries influence: "It was time for them to have their own home."
The big question now is whether Remgro’s move to unbundle its stakes in RMH and FirstRand inspires other investment holding companies to follow suit. Shareholder activist Chris Logan, who engaged Rupert in a quirky exchange, commended Remgro for unbundling a company at the top of its game. "Usually companies are unbundled when they are off the boil," he said.
Indeed, unbundlings have been a mixed bag on the JSE over the years. A few that have overcome initial market repulsion include Montauk Energy (Hosken Consolidated Investments), Astral Foods (Tiger Brands) and MiX Telematics (Control Instruments).
In my mind, the most obvious contender would be Remgro’s fellow Stellenbosch-based investment company, PSG Group, where a holding of 35.5-million Capitec Bank shares accounts for a hefty 70% of the portfolio’s sum-of-the-parts value.
I’d rather be at Leopard Creek watching golf than see my colleagues criticised
— Johann Rupert
Just more than 10 years ago PSG famously unbundled its initial major holding in Capitec. It was a decision the group almost instantly (and fortunately) regretted, and the Capitec stake was rapidly rebuilt.
This time it’s different. Capitec is a more mature business, and, while prospects still look compelling, there is now growing competition from some slick online bank offerings.
The relative size of the Capitec holding has also meant PSG has become a virtual proxy for the bank, obscuring other interesting investments like private education ventures Curro and Stadio, financial services business PSG Konsult, agribusiness investor Zeder and a few promising unlisted investments in PSG Alpha.
Prickly issue
Sticking with Remgro, there were flickers of resistance at the AGM to the re-appointment of certain directors to the board and, in particular, to the audit committee. This riled Rupert — especially as, just before votes were cast on the audit committee members, he had told shareholders how fortunate they were to have the four executives (Sonja de Bruyn, Peter Mageza, Fred Robertson and Jabu Moleketi) in this capacity.
Knowing some of these people, I tend to agree wholeheartedly.
When almost 10% of shareholders voted against De Bruyn’s appointment, Rupert railed: "This shows you how dumb some of our shareholders are … They probably want someone with zero skin in the game … a lawyer, a professor or an accountant. It would take [a new person] five years to understand the company, and by then it’s time to leave."
Rupert also bristled at a shareholder’s query relating to the more prickly issue of whether (recent) shareholder returns and executive remuneration were aligned at Remgro. "I’d rather be at Leopard Creek watching golf than see my colleagues criticised."
Criticism (and I’m a Remgro shareholder) is perhaps not unjustified.
Remgro has not performed well since 2016, and effectively lost money for shareholders.
Rupert maintained: "Either you trust us to make sure there is an alignment, or you don’t. If you don’t trust us, buy other shares."
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