THE operational assets of iconic liquor business KWV Holdings — controlled by empowerment giant Hosken Consolidated Investments (HCI) — is to be sold for R1.15bn to a firm aligned to entrepreneur Vivian Imerman, it was confirmed on Wednesday.

Business Day speculated about the possibility of such a deal last month, after KWV issued a cautionary notice.

Mr Imerman will buy KWV’s operational assets via his Vasari Group, an investment firm focused on branded goods and manufacturing in Europe, Asia and Africa.

The assets acquired from KWV include production facilities and brands as well as wine and brandy stock. But certain “heritage” assets will remain in KWV. These include nonoperational assets such as the Laborie Estate, KWV’s art collection and the head office building La Concorde. There is an estimated inferred value of R250m or about 400c/share on the “heritage” assets.

The R1.15bn price tag for KWV’s operational assets equates to around R17/share — which is more than three times the last traded price of KWV shares on the over-the-counter market. At last count, KWV held a net asset value of just more than R18/share, although some pundits believed a fairer value was near to R22/share.

It is not clear what KWV will do with the cash proceeds. The word from HCI’s listed subsidiary Niveus, which holds a direct 57.13% stake in KWV, is that “no immediate plans exist for the application of the proceeds and the cash will be retained by the group”.

There was immediate speculation that a special dividend could be declared to shareholders, after which Niveus could make an offer to buy out KWV minority shareholders. But matters are somewhat complicated by the settlement being staggered with R575m paid upfront by Vasari, and the balance deferred and settled in three equal cash instalments over three years.

Niveus said the Vasari offer represented a return on investment that warranted acceptance. HCI paid R11.80/share when it acquired 35% of KWV from the then controlling shareholder PSG in 2010.

Mr Imerman’s plans for the KWV operational assets will also be keenly anticipated. Under HCI, KWV struggled for sustained profit growth with the local brandy market proving extremely tough.

Most punters have held that KWV needed to bulk up its brand offering by diversifying from the wine and brandy core, in which the company enjoyed limited success after introducing a small range of ready-to-drink brands.

Mr Imerman — best known to South African investors as the prime mover at Del Monte Royal Foods in the ’80s and ’90s — has enjoyed great success in the liquor industry by turning around whisky maker Whyte and Mackay and later selling it at a huge profit.

KWV owns brands such as Roodeberg, Laborie, Golden Kaan, Cathedral Cellar, Cafe Culture, jimmijagga and Wild Africa Cream, as well as its best-selling three-, five-, 10-, 15-and 20-year-old brandies.

Mr Imerman said deep operational experience in managing integrated consumer businesses positions would allow Vasari to maximise KWV’s rich heritage as part of a drinks strategy straddling Africa and Asia. “As Vasari works to grow KWV in SA, on the continent and other parts of the world, we anticipate long-term growth throughout the value chain.”

Long-time KWV shareholder Chris Logan and Piet Viljoen, CEO of RECM & Calibre (a significant minority in KWV) agreed the Vasari proposal was a good transaction.

Mr Viljoen said it again highlighted that the HCI and Niveus executives were good allocators of capital. Mr Logan added that Mr Imerman and Vasari were exceptionally competent operators in the liquor industry. “Vasari will be acquiring an operational entity with great brand value, excellent production skills as illustrated by KWV’s numerous awards, and vastly underutilised production facilities.”

He believed KWV stood to be revitalised in the same way Vasari revitalised Whyte and Mackay. “As shareholders our only regret is that we will be receiving cash, rather than going along for the ride.”


Source: BDLive – Marc Hasenfuss