Imperial Holdings CEO Mark Lamberti will push ahead with his plan to split the company next year unless South African political turmoil or a sovereign rating downgrade force a delay.
The planned separation of the vehicles and transport businesses into two Johannesburg-listed entities "is taking up 30% of top management’s time", Lamberti said this week.
Imperial would start the process in 2018, unless "the market goes to hell, then we obviously have to say the situation is not appropriate".
Preparing Imperial for a split has been a main focus of Lamberti’s since he took the helm in 2014 and concluded that the company was made up of two distinct divisions without any operational overlap.
The founder and former head of retailer Massmart has since reorganised Imperial through a series of disposals and acquisitions, and set up separate management teams.
He planned to leave Imperial either at the time of the unbundling or, if that is delayed, after delivering full-year earnings figures in about August 2018, he said.
"In terms of what this business should be, it should be two separate businesses," Lamberti said at the company’s east Johannesburg headquarters, which looks out over sports fields. "They should be listed, they are large enough to stand on their own. Our major investors have all confirmed that is the way they feel."
Imperial shares have increased 6.9% this year, valuing the company at R39bn. That compares with a 10% rise on the JSE’s all-share index.
Political uncertainty
Imperial’s automotive business imports, rents and sells vehicles mainly in sub-Saharan Africa, while the logistics arm transports goods including medicines and food in more than 30 countries around the world.
The two divisions were held together only by Imperial’s balance sheet, and a separation would allow each business to seek debt and equity independently, the CEO said.
Both units would be listed on the JSE, while it may make sense for the "increasingly global logistics business" to consider an additional overseas listing at a later time.
Imperial said last month it would announce the form and timing of the separation by August next year, at the time of its results presentation for the year to end-June 2018.
The ANC’s electoral conference in December will influence how investors view the country’s prospects.
The firing of Pravin Gordhan as finance minister in March triggered credit rating downgrades by S&P Global Ratings and Moody’s Investors Service.
Lamberti had overseen the sale of 42 businesses and 52 properties by end-June, and he said the disposal drive was largely completed.
Recent acquisitions have included the UK’s Pentagon Motor Holdings for R493m, a price the company negotiated down due to the impact of the Brexit vote, the CEO said.
The separation of the Imperial businesses was not to create immediate value, Lamberti said, though the company’s own calculation of the sum of its parts "suggests there is some".
"Even if the calculations indicate that there’s is no value unlock, I still think that there’s enormous merit in separating the businesses," the CEO said.
Bloomberg
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