Reinet's tobacco holding falls below 50%
Latest results show Rupert family investment in British American Tobacco is now 48.6% of net assets compared with 56.6% in 2018
The tobacco content in Reinet, the investment company controlled by the Rupert family, is now below 50%.
On Wednesday Reinet issued a management statement for the third quarter to end December, which showed its anchor investment in British American Tobacco (BAT) is now 48.6% of net assets, compared with 56.6% at the end of September 2018.
If anything, the collapse in value of Reinet’s BAT holding should focus more attention on other elements of the investment portfolio.
When Reinet listed in 2008 its original stake in BAT was more than 85% of the portfolio. In March 2018 — despite much diversification in the Reinet portfolio and the sale of two parcels of BAT shares — the tobacco group still represented 71% of net asset value (NAV).
In the last year, however, the price of BAT shares — holding a primary listing in London and a secondary listing on the JSE — have been unceremoniously snuffed out.
Reinet CEO Johann Rupert said the falling BAT share price was the main reason for the €944m drop in the group’s portfolio value to €3.9bn.
Reinet holds 68-million shares or a 2.96% stake in BAT after selling 44,000 shares to raise €1m during the quarter. The total value of the BAT investment is €1.9bn with the tobacco company's share price on the LSE decreased from £35.84 at the end of September to £25 at the end of 2018.
The BAT share price has been hit hard by an announcement that the US Food and Drug Administration is mulling a review of regulations relating to menthol cigarettes. In 2017 BAT acquired 100% of US tobacco giant Reynolds.
Reinet did, however, earn dividends topping €37m from BAT during the quarter.
Even though the value of Reinet’s major stake in UK-based financial services business Pension Insurance Corporation (PensCorp) was marked down to €1.2bn (end September: €1.4bn), this investment now represents a chunky 30% of the NAV and ranks as the group’s second biggest investment.
In the third quarter Reinet’s investment in the Trilantic Capital Partners (the old Lehman Brothers investment bank business) jumped to €224m from €194m at the end of September 2018.
Reinet said the increase in the estimated fair value was due to net capital contributions of €22m together with increases in the estimated fair value of underlying investments.
The group noted that at the end of 2018 it had committed €38m to Trilantic Energy Partners II and €223m to Trilantic Capital Partners VI.
Reinet’s Asian private equity and portfolio funds also featured more prominently with the value pushing out to €213m (€168m at the end of September 2018).
The marked value shift follows Reinet investing €44m in the recently launched Prescient China Equity Fund.
In terms of new investments during the quarter, Reinet acquired 357,000 shares in Twist Bioscience for €4m as part of that company’s initial public offering (IPO).
The IPO participation followed Reinet’s decision in 2017 to spend €4m on 235,000 shares in Twist.