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HCI CONFIDENT OF RIDING OUT BUMPS IN THE ROAD AHEAD

12 Nov General

TRADE UNIONS HAVE TRANSFORMED WHAT WAS ONCE AN UNEXCEPTIONAL GROUP Four years ago, Hosken Consolidated Investments (HCI) was a lessthan-thrilling company whose only assets were stakes of 25.5% in Saflife and 55.7% in IGI Life. Then a group of trade unionled investment companies took control of the group and injected a further R480-million worth of investment into it. Today HCI boasts a market capitalisation in excess of R2billion. This follows a distribution of R1.5-billion to shareholders. HCI is one of the top-performing companies on the JSE. If shareholders had invested R10 000 in HCI five years ago, the return on that investment would be worth R176 373 today, compounded over the five years. It is also the top-performing empowerment company on the Top 100 list at a time when most empowerment companies have taken a beating on the stock market. Research by I-Net Bridge shows that HCI made a return of 77% compounded over the fiveyear period to September. Prior to taking control of HCI, the Mineworkers Investment Company or MIC (the investment arm of the National Union of Mineworkers), and the investment arm of SA Clothing and Textile Workers Union built a substantial portfolio of assets valued at R200-million. They also had options to buy into assets such as Vodacom. But they had incurred big debts in building the portfolio. ‘We needed capital and we needed a decent vehicle into which to reverse-list. HCI was perfect’ “We started with R5-million and our portfolio had grown to around R200-million, but 97% of that was debt,” says CE Johnny Copelyn. “It was a frightening prospect because there was a lot of value in those assets and we needed access to capital. “We also needed a decent vehicle into which to reverse-list. HCI was perfect.” Copelyn says there was a need to build a distance between the trade union and the business. “One of the most obvious ways to do this was through a public company. It would also ensure union members would be able to realise capital gain,” he said. At first, HCI was small, trading just above 200c. The two trade unions then injected their assets, including a 5% stake in Vodacom. They have built on these initial assets and the group now boasts stakes in companies such as Midi TV (e.tv’s parent), Y-FM, Mettle (48%) and Cape Talk. Chairman Marcel Golding says HCI at no stage adopted the much-criticised pyramid structures which other empowerment companies often used. In addition, HCI is the only company where real economic benefits are in the hands of blacks, claims Golding, referring to the dividend returned to shareholders after the group unbundled its stakes in Softline and Unifer. A total of R1.5-billion was paid out to shareholders, of which R750-million was returned to the trusts that control MIC and Sactwu. It has not all been plain sailing. Golding and Copelyn, who helped found MIC and Sactwu investments respectively, had a fall-out with their MIC colleagues, which led to Golding quitting MIC. Drama has taken place both at e.tv and Midi after minority shareholders failed to come up with funding for their portion of the Midi stake. HCI still faces the outstanding issue of regulatory approval for its plans to convert into shares Rembrandt’s R280-million loan to Sabido Investments, the new vehicle which will house e.tv shareholders’ interests. The Independent Communications Authority of SA (Icasa) has yet to decide on the issue. But Golding is hopeful Icasa will approve the transaction. “We believe we have presented them with an exhaustive case,” says Golding. Golding reckons e.tv offers a lot of value and is a valuable resource. This explains why Rembrandt’s Johann Rupert was convinced to come aboard, he says. But the station still requires additional capital, on top of the R280-million injected by Rembrandt, to take it into its next growth phase. A capitalraising exercise is expected soon, he says. Asked if HCI could sell its 5% Vodacom stake, Copelyn says he believes a listing will eventually create an opportunity to realise its investments. “We will sell at the right price,” he says.

Source: Sunday Times – Thabo Kobokoane