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MARKET WATCH: POUR US A DIVIDEND PLEASE

21 Oct KWV Holdings

Long-suffering shareholders in unlisted liquor group KWV Holdings will be cheered by the news that the sale of the company’s operating assets to Vivian Imerman’s Vasari has finally been concluded.

Asset-rich but operationally poor, KWV has been a test of endurance for the many investors that lived in hope that the underlying value — sometimes discounted as much as 60% by the over-the-counter share price — would eventually distil into rich returns.

So there was probably a collective sigh of relief when Niveus Investments, the Hosken Consolidated Investments (HCI)-controlled holding company for KWV, reported last Friday that the R575m cash portion of the R1.15bn disposal consideration, as well as the fully executed bank-guaranteed promissory notes, had been received from Vasari.

While it’s absolutely reassuring to have cash-on-hand and cash-on-tap in these tremulous times (Vasari will pay the balance of the purchase price in monthly instalments over the next three years), there will still be lingering questions around the fate of KWV — which will be renamed La Concorde Holdings.

No rush to unlock value

Aside from its cash pile and future cash flows, La Concorde also holds valuable property. This includes the La Concorde head office in Paarl and the Laborie wine estate, as well as a (very) valuable SA art collection.

As things stand, La Concorde holds a conservative value of about R20/share: a R17/share cash underpin and a conservative R3/share for the property and art “heritage assets”.

At the KWV AGM earlier this year, executives made it clear that a decision around unlocking value at La Concorde would not be rushed. The property will almost certainly benefit from redevelopment and the art is likely to appreciate in value (judging by current trends).

But an obvious option is for La Concorde to distribute the cash-in-hand as a special dividend to the company’s shareholders.

It might also make sense for Niveus, which holds about 57% of La Concorde, to make an offer to minority shareholders. The second option makes a great deal of sense, especially considering the push into property development that is taking place in the greater HCI group.

Of course, the price that Niveus pitches to La Concorde minorities will be crucial. Remember how a bunch of small shareholders stymied PSG/Zeder’s attempts to nudge the old KWV towards Pioneer Foods’ Ceres Beverage Company in 2010?

Then again, executives at HCI (and its subsidiaries) have shown they are adept at allocating capital.

So if there is early corporate action or strategic developments at La Concorde, shareholders may be keen to stay aboard for a longer ride.

Sweet returns

I know some La Concorde shareholders were a little disappointed there was no option to ride along with Vasari — who, some suspect, may just have the touch needed to extract sweet returns from the award-winning KWV wine and brandy portfolios.

I did entertain some fantasies that Imerman’s special-purpose acquisition vehicle Sacoven, which listed on the JSE in September 2014, might somehow be involved in the KWV deal.

Last week, however, Sacoven — which had a time limit in which to secure suitable operating assets — capitulated on the London Stock Exchange’s AIM and the JSE (where it has a secondary listing).

A Sens notice advised that the company and its investment manager, Vasari Global, had investigated “numerous potential opportunities”, some of which resulted in further due diligence and detailed negotiations.

All deliberations, unfortunately, came to nought. Sacoven has now decided to throw in the towel when it comes to seeking out investment opportunities.

This means shareholders (other than controlling shareholder Brunswood) will have to vote on cancelling the listings on AIM and the JSE.

Perhaps, one day, Imerman might still be tempted to take Vasari to the JSE.

In the meantime, Vasari’s intention to maximise KWV’s rich heritage as part of a drinks strategy straddling Africa and Asia will be closely monitored — particularly by shareholders in the dry La Concorde.

Source: Financial Mail – Marc Hasensfuss