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Tobacco group may smoke out minorities
CAUTIONARY PUZZLE
INTERNATIONAL tobacco group British American Tobacco could take an even larger slice of local subsidiary BAT South Africa (Batsa) following a cautionary notice by Batsa (formerly Utico) to shareholders this week. The cautionary seems to have surprised the market. Analysts are unsure what the discussions could entail and with whom they are being conducted. Analysts say BAT could be looking at increasing its 63% stake in the local company and taking out minorities. The company, whose major brand is Benson & Hedges, has shown sustained growth in its operational performance and share price since November 1996, when BAT renewed its interest in the local company and installed MD Steven Jurgens. The new boss slimmed the number of brands, reduced costs and focused on quality. The effect was evident in results for the six months to June last year, when Batsa more than doubled attributable income to R17.8-million on the back of higher prices and increased volumes. The company warned, however, that it would not be able to maintain such high growth for the full year as it planned to spend heavily on strategic initiatives. Analysts say the change of name from Utico and the appointment of Jurgens were the first steps in realigning the SA company with its multinational parent. The two maintained an arm's length relationship during sanctions. The share is thinly traded and BAT may want to take out the minorities. In an industry under attack, BAT may want a lower profile. Analysts say the cautionary could also refer to a bolstering of moves by Batsa to manufacture brands for other companies. Last year it struck such a deal with RJ Reynolds. A third possibility is an empowerment partner. In September, Batsa announced a distribution partnership with Soweto-based Saint M Wholesalers.
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