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Busy BEEs

Busy BEEs

Cape Town’s three JSE listed em­powerment companies – Brimstone, African Empowerment Equity In­vestments (AEEI) and Grand Parade In­vestments (GPI) - have all reached critical junctures in their corporate development.

All three companies have strong commu­nity roots in Cape Town, and have stoically endured the slings and arrows of outrageous fortune since the late nineties. Each com­pany has needed to dig deep to pull through challenging times; Brimstone saw its share price tumble to alarmingly low levels after a restructuring of its portfolio, AEE was on the canvass after the LeisureNet implosion and GPI had to survive a hostile takeover before it listed on the JSE.

Their collective fortitude – during a peri­od where larger and more hyped empower­ment entities flagged and fizzled - has paid off and all three companies now look set to push ahead with rewarding new ventures that could create heaps of value for profes­sional and community shareholders alike.

The collective value of these BEE enti­ties currently sits at almost R8bn – the big­gest being Brimstone with a market value of almost R4bn, followed by GPI (R2.8bn) and AEE (R1.3bn.) This is an astounding achievement considering these companies were started from scratch with mainly small investments from community members.

Common to all has been a determination to play an active role in underlying invest­ments and to back strong brands or assets that generate steady cash flows. All three are now firmly in dividend paying posi­tions – Brimstone and GPI have sustained dividends for a number of years and AEE paying its maiden dividend last year (with a promise of more to come.)

All three are well capitalised and can be regarded as empowerment deal defaults – which means established companies are likely to approach these entities with proposals for BEE deals.

Brimstone is underpinned by valuable minority holdings in JSE listed private hospitals group Life Health and fish­ing group Oceana. The group headed by the potent triumvirate of Mustaq Brey, Fred Robertson and Lawrie Brozin also holds interests in other listed compa­nies like franchising group Taste Hold­ings, fashion retailer Rex Trueform (see page 2) consumer brands conglomer­ate Tiger Brands and shipping/logistics giant Grindrod.

But Brimstone has lately signalled a growing appetite for the food sector – which is where CBN believes there might be some inspired deal-making in the years ahead. Aside from the holdings in Oceana and Ti­ger Brands, Brimstone holds a controlling stake in market leading hake fishing busi­ness Sea Harvest. Sea Harvest is mainly a value-adding food company – catching and processing hake for the frozen fish market. But Brimstone could look at using Sea Har­vest as a base to expand its food offering by adding other frozen and non-frozen food applications. For instance, there have been whisperings over the years that Brimstone may swoop on the poultry sector.

Another possible thrust in the food seg­ment could come from Brimstone’s associa­tion with Taste, which has snagged the local Starbucks coffee licence as well as the rights to iconic global pizza brand Dominos. To date Brimstone has been happy to back Taste’s ventures, and the empowerment company could well become a more active partner in future endeavours.

AEE – formerly the old Sekunjalo Invest­ments – also has plenty on its plate. The company’s share price has surged in the last 18 months as cash flows from operations in­creased markedly. AEE has scored strongly from strategic investments in British Tele­coms as well as consumer brands giant Pio­neer Foods as well as steady performances from its fishing and technology interests. But more intriguing is the talk in the market is that AEE could look to separately listing its Premier Fishing subsidiary on the JSE.

Premier Fishing – which is very strong in the south coast and west coast lobster ex­port markets – could well use the listing as a platform to chase down deals to diversify its earnings base. The company has already successfully moved into the pelagic sector, and might fancy broadening its catch even further by buying out other fishing ventures. Premier is also involved in abalone farm­ing, another seafood segment that might be ready for corporate action.

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