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Distell shareholder wants state's help in China's wine market by Asa Butcher04/06/2018  

Trading was lacklustre as Distell returned to the bourse with a cleaner structure and a bigger free-float


Distell Group minority shareholders are urging the controlling investors to persuade the government of the benefits of duty-free access to the rapidly growing Chinese wine market.

Chris Logan, CEO of Opportune Investments, said SA, despite being a Brics member, had lost out on big opportunities in the Chinese market.

"One has to hope that the PIC [Public Investment Corporation] and Remgro are able to convince the government of the remarkable opportunity that exists for jobs, empowerment and tax revenue if a constructive and co-operative relationship can prevail between industry and the government," said Logan.

The activist investor was speaking on Friday after a lacklustre first day of trading for the relisted Distell Group. The share slid from an opening price of R130 to a close of R127.99.

The new entity marks the end of the pyramid control structure, which gave investors many entry points to Distell.

Distell Group has two major shareholders: the PIC with about 31% and Remgro with a 31.4% stake and voting control. The new structure sees a substantial increase in the company’s free float, from 19.5% to 37.5%.

MD Richard Rushton said the increased free float "would boost the general marketability of Distell stock to local and international investors.

"In addition, the simplification of our shareholding structure should improve the company’s ability to raise the additional capital in the future, if required, to fund our growth ambitions."

Friday’s listing was the culmination of a seven-year-long bid to make a contrived corporate structure more responsive to investor needs and better able to deal with a more competitive marketplace.

It represents the undoing of a dysfunctional structure put in place in the late 1970s and described by the competition authorities in the early years of the 21st century as a "notorious market-sharing arrangement" between South African Breweries (SAB) and the Rembrandt Group (Remgro).

In terms of that arrangement SAB undertook to limit it involvement in the wine and spirits market and Remgro undertook to stay out of the beer market. Control was shared equally between Remgro, KWV/Capevin and SAB.

Over the years the structure was tweaked, with Remgro moving closer to Capevin and effectively squeezing SAB out of any management role. In time Remgro emerged as the single most powerful shareholder with its own direct 26.4% stake boosted indirectly by its 19% stake in Capevin.

Expectations that Remgro would in time buy out the SAB stake and emerge as a well-resourced investor determined to realise Distell’s growth potential suffered a setback when, in late 2016, the PIC emerged as the acquirer of the SAB stake. The PIC paid R170 a share for SAB’s 26.4% stake.