The Rupert empire stubs out its last smoke

Reinet, the investment holding company owned by South Africa’s richest family, sold its last remaining stake in British American Tobacco to cut ties with the industry on which it was built.
2 mins read

The Rupert family empire, built on cigarette sales pioneered in founder Anton Rupert’s garage, has finally quit the habit and stubbed out its last smoke.

Reinet, the family’s specialised investment fund, announced on Tuesday that it had agreed to sell its entire stake of just over 43-million shares in British American Tobacco (BAT). The shares were priced at £28.20, a slight discount to the prevailing market price of the company, which produces brands such as Dunhill, Lucky Strike and Camel.

The sale gives Reinet a thumping cash boost of about £1.22bn, or R23bn, setting the stage for further deals. 

The market applauded the decision, boosting the share price by about 7%. The transaction is small in BAT’s life, less than 2% of its total shareholding, and its share price slipped marginally on the discounted transaction. 

Symbolically, the transaction marks the end of an era for the Rupert dynasty – perhaps more so for Reinet chair Johann Rupert, a famously unapologetic chain smoker – as the cigarette business has long been the foundation of the group’s extensive suite of companies.

The family empire’s roots can be traced to the 1940s, when Anton Rupert, a chemist, started a small tobacco company called Voorbrand in Joburg. It would later be renamed Rembrandt, list on the stock exchange and, through partnerships, start expanding internationally in the 1950s.

Anton Rupert also entered the wine and spirits industry, co-founding Distillers Corporation with Dirk Willem Ryk Hertzog, adding to a portfolio that would later include industries like health care, luxury goods and financial services through powerhouses like Remgro and Richemont.

The deal places somewhat of a question mark on Reinet’s future. The BAT holding really relegated the company into something like a contingent investment into the cigarette industry. In typical fashion of the Rupert empire, the company was reticent on its future, saying only that “Reinet intends using the proceeds from the placing for its ongoing investment activity”.

Johann Rupert. Picture: Luke Walker/Getty Images

Financial analyst Charles Russell from SBG Securities says that, over the past 12 years, Reinet’s stake in BAT has helped fund the diversification of its portfolio away from listed investments.

“Investors in holding companies want access to exciting, high-growth unlisted investments,” he says. “As such, the BAT investment had become non-core to the portfolio, though still roughly one-quarter of the net asset value.”

The sale provides Reinet with the opportunity to do two things: first, increase its investment in Pension Insurance Corporation Group (PICG), which investors already view as a really great asset; or, second, “invest in something rather large and unlisted (up to R37bn) that adds something differentiated to the Reinet portfolio”, Russell says.

PICG, a UK pension fund insurance business, has been growing solidly, with clients like TotalEnergies, diamond company De Beers and retailer Next. Outside of BAT, it constitutes Reinet’s largest investment, but there are a host of other interesting companies in the group, including a gold exchange, a South Asian “super-app” and a bioscience company.

After years of being a kind of conservative holding operation, Reinet is in danger of becoming interesting.

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Tim Cohen

Tim Cohen is a long-time business journalist, commentator and columnist. He is currently senior editor for Currency and editor at large for the Daily Maverick. He was previously the editor of Business Day and the Financial Mail.

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