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Trump win highlights new, populist-led era - Old Mutual Investment Group

Following Donald Trump’s shock win in the US elections, the world’s attention has shifted to what extent his proposed policies will be implemented and the implications for global markets. This is according to Peter Brooke, Head of Old Mutual Investment Group’s MacroSolutions boutique, who believes that the world is entering a new, populist-led era, meaning a pull back from globalisation and a move towards more isolationist policies.

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Old Mutual to sell Italian stake

According to IOL Old Mutual is set to offload its Italian stake following its announcement on Friday that it has entered into a short period of exclusive negotiations with Cinven, the owner of Ergo Italia, regarding the sale of Old Mutual Wealth Italy.

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Old Mutual to separate its four business units

Old Mutual been in talks with National Treasury, the Reserve Bank and the Financial Services Board (FSB) over the course of its strategic review.This as Old Mutual announced on Friday that it is to separate its four businesses namely:

  • Old Mutual Emerging Markets (OMEM)
  • Nedbank
  • Old Mutual Wealth
  • Old Mutual Asset Management

It also said it will reduce its 54.1% stake in Nedbank.

In a joint statement on Friday, National Treasury, the FSB and Reserve Bank said Old Mutual had been in regular contact with them.

“Old Mutual has been in regular contact with the National Treasury, the Reserve Bank and the Financial Services Board (FSB) over the course of the strategic review.”

“The consultation and dialogue has been constructive, and there is a commitment by the boards of directors and management teams of Old Mutual, Nedbank and OMEM to execute the managed separation in a way that safeguards the stability and integrity of both the South African businesses and the South African financial services sector more broadly.”

The three entities said OMEM and Nedbank are each significant businesses in their own right with strong balance sheets.

“The enhanced ability of these businesses to access their natural shareholder base is welcomed, as is the increased alignment of the key governance structures and lead supervision with the location of the respective businesses. This will have positive benefits for the South African economy and capital markets.”

The managed separation process will involve ongoing regulatory engagement. The FSB and the Reserve Bank will work with Old Mutual and Nedbank to ensure that any potential execution risks are mitigated.

Old Mutual’s strategic review concluded that there are limited tangible synergies between the businesses in the group and the current group structure inhibits the efficient funding of future growth plans for the individual businesses.

The evolving regulatory environment adds a degree of further cost, complexity and constraints because of the current group structure.

As part of this managed separation, Old Mutual has stated its intention, in time, to reduce its shareholding in Nedbank to an appropriate strategic minority position.

“The exact mechanism to achieve any reduction in Old Mutual’s shareholding in Nedbank has yet to be finally determined, but Old Mutual has communicated that it currently envisages reducing its shareholding in Nedbank primarily by way of a distribution of Nedbank shares to the shareholders of Old Mutual in an orderly manner and at an appropriate time in the context of the managed separation and does not intend to sell any part of its shareholding in Nedbank to a new strategic investor.”

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Bump and grind for 2016

PROSPECTS for business in the Western Cape for 2016 look daunting. Political ructions have sent the Rand spiralling down against major currencies, the country’s fiscal policies look anything but disciplined and brittle trading conditions, across the board, look overwhelming. But local commerce and industry have proved hardy and resilient over many generations, and CBN expects local business – especially the inventive companies in the Western Cape – to endure tough times thanks to their built-in innovative fortitude. Here are the 16 developments that might bear watching in Western Cape business during 2016.

  • Cash is king for prince of deals Jannie Mouton

Just before 2015 closed out the mighty Stellenbosch-based investment house PSG collected R2,2bn in a book-build offer. Investors literally fell over each other to hurl money at PSG – which has enjoyed huge successes with Capitec Bank and private education venture Curro Holdings. CBN does not expect PSG to sit on that cash for very long, and reckons 2016 could be the year Mouton and his team really move and shake in the deal-making arena. The smart money says watch PSG’s agri-business associate Zeder for new deal-making activities.

  • Private equity appetite

Cape Town-based fresh produce retailer Food Lover’s Market looks set for a growth splurge. The company attracted a R760m investment from private equity investor Actis, which now holds a substantial minority stake in the business (which was founded by local entrepreneurs Brian and Mike Coppin.) Food Lover’s Market has over 120 stores and also operates over 200 FreshStop convenience stores at Caltex service stations. It recently bought artisanal coffee brand Seattle Coffee.
Mike Coppin said the deal with Actis was a great business fit for Food Lovers’ Market’s growth strategy in the future.

  • A word to the Wi(e)se

CBN reckons readers should watch developments at retail tycoon Christo Wiese’s smallest investment – Stellar Capital Partners (SCP.) SCP recently raised R1bn in fresh capital, and is now in the throes of buying full control of Retreat-based electronics manufacturer Tellumat. It seems almost certain SCP will also push for a bigger stake in vibrant industrial company Torre in the year ahead.

  • A steep learning curve

In one of the most unexpected shifts Cape Town investment company Trematon Capital Investments – which owns mainly property investments – made a cautious shift into the private education market by setting up a ‘Generation’ school in Sunningdale - Cape Town’s fast growing north-western suburb. CBN hears the school enrolments for this year were so overwhelming that Trematon is likely to extend the Generation concept to other areas of Cape Town.

  • Taking growth supplements

Steenberg-based health care brands conglomerate Ascendis has more than doubled its market value to close to R5bn since listing in late 2013 after a series of successful acquisitions. CBN understands Ascendis will not be taking a ‘chill-pill’ in 2016, and that several deals – including further offshore forays – are likely to be tabled.

  • Bulking up in the food sector

What chances that 2016 is the year local food companies opt for a consolidation recipe. CBN has a gut feel that the mix of local food companies – ranging from the large like Pioneer Foods and Premier Foods to the more niche offerings of Rhodes Food Group, Quantum Foods and Bounty Brands, Sea Harvest and Premier Fishing – could find new corporate recipes via mergers or takeovers.

  • Flawed but feisty

Parow-headquartered diamond miner Trans Hex Group has struggled through a tough few years. The outlook for diamond prices looks somewhat tarnished, but efforts to bring the recently acquired Namaqualand Mines (acquired from gem giant De Beers) into production could be a critical turning point for Trans Hex.

  • Drinking in new opportunities

Epping-based plastic packaging specialists Bowler Metcalf decision to pour its Quality Beverages soft-drink operations into the larger SoftBev amalgamation looks like it could pay dividends this year. SoftBev hit the ground running by snagging the Pepsi bottling contract, which will test the operational and marketing efficiencies of the new business. If things go as planned SoftBev might look to raising fresh capital to grow the business – an event that might see Bowcalf increase its stake in the company as well as the possible emergence of a new strategic partner.

  • Go west young man

The Saldanha Industrial development Zone (IDZ) will hopefully gain further traction this year. The Western Cape economy certainly needs a dedicated industrial hub to provide extra growth impetus and boost job creation. Let’s hope the oil price, which has driven so many African economies and will stimulate shipping/oil rig maintenance and repair activity, starts firming markedly this year. Increased property activity in the Mykonos precinct seems to suggest things are well on track for an encouraging 2016 on the Weskus.

  • Spurring on Burger King

At the end of 2015, CBN could count 51 Burger King stores scattered around the country (albeit mainly concentrated in Cape Town and Johannesburg.) Empowerment investor Grand Parade Investments has carefully rolled out Burger King to ensure margins are suitably succulent and that the balance sheet is not starved of development capital. CBN wonders whether the year ahead will see GPI capitalise on its relationship with Spur Corporation, in which it has a 10% stake, to accelerate the roll-out of Burger King stores? Spur has a muscular balance sheet with plenty cash, and the company’s experienced management could only add flavour to GPI’s efforts to build GPI into a strong fast food brand.

  • Taming the lion

Iconic empowerment group Brimstone will have its work cut out in 2016 to clean-up a rather unsavoury mess at its shot-term insurance subsidiary Lion of Africa. While Brimstone would probably prefer to be scouting for new investment opportunities, a successful turnaround at the Lion would add to its credibility as determined long-term investors that are not afraid to roll up their sleeves and get stuck into the investment portfolio.

  • Armed to the teeth

Just before the end of the year African Empowerment Equity Investments (the old Sekunjalo Group) finalised a R100m deal to take a 25% stake in defence contractor Saab-Grintek. The deal guarantees minimum annual dividends of R18m, which appears to underpin confidence that Saab-Grintek might be a very industrious investment for AEEI.

  • Raiding the vineyards

There were a number of forays by foreign buyers into the wine sector – including the mergence of buyers from China and India. With the Rand tanking against major currencies, the SA winelands must look like bargain real estate compared to the vineyards up for sale in traditional vino areas like California, Australia and France.

  • The runt might save us

The rout in the Rand after the shock dismissal of finance minister Nhlanhla Nene, and the following debacle around the finance ministry, might well have a silver lining for the Western Cape economy. Looking in the bright side … as a tourist destination the Cape becomes cheaper to overseas visitors, our wine and fruit farmers can bring in additional export revenue and the beleaguered clothing manufacturing sector gets a reprieve as imported garments are no longer cheap.

  • Asset test

Cape Town has traditionally been the home of the asset management industry – what with old school ‘wealth managers’ like Old Mutual and Sanlam calling the city home turf. What will be interesting to gauge, however, in 2016 is whether asset management poster child Coronation Fund Managers – for so long the undisputed market leader – is on a slippery slide and whether feisty newcomer Sygnia is about to unleash a revolution that could completely disrupt the wealth management hub.

  • Stoking the brandy war

It looks like brandy heavyweights Distell and KWV could be at each others throats in 2016 in a bid to secure a viable portion of the fast shrinking brandy market. KWV has already fired the first salvo, intimating that Distell – which owns best selling brands like Klipdrift and Richelieu - is betraying the ‘premiumisation’ of the brandy category with dangerous discounting. It will be interesting to see if KWV plugs away in the premium sector with its award winning brandies…or whether it takes the fight to Distell with a mass market offering.

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