LONDON — Johann Rupert, executive chairman and chief executive officer of Compagnie Financière Richemont, parent of brands including Cartier, IWC and Dunhill, wants to hang onto his highly lucrative stake in British American Tobacco.
Reinet Investments — a financial company founded and chaired by Rupert and quoted on the Luxembourg Stock Exchange — issued a statement Tuesday proposing to retain its 4.3 percent stake in BAT, contrary to an original plan.
In 2008, when Reinet was spun off from Richemont and formed as a stand-alone investment vehicle, it inherited much of Richemont’s BAT shares. Today, nearly 87 percent of Reinet’s net asset value is made of those BAT shares.
Reinet’s original listing prospectus indicated that it planned to reduce the shareholding in BAT to less than 30 percent of Reinet’s total assets of over a four-year period, which will expire in October. The proposal was in line with guidance provided by the Luxembourg regulator in terms of risk diversification at the time.
In Tuesday’s statement, Rupert said times have changed radically since then.
“The last three years have seen unprecedented turmoil in global financial markets,” he said. “We now face the government debt problem in the euro zone, which may yet have serious consequences for the euro. Economies are shrinking as governments struggle to bring their borrowings under control.”
He said that since 2008, Reinet had made several “interesting investments,” using the cash resources that it had at the time of its formation as well as the “significant dividend income” from BAT. He added that Reinet never needed to dip into the actual BAT shares to finance those investments and had made a conscious decision not to reduce its stake in the tobacco company.
“In these difficult times, we believe that it would be wrong to dispose of what has been, by any standards, an excellent investment,” Rupert said, adding that, since 2008, the BAT shares have appreciated by about 70 percent in British pound terms, and provided Reinet with an aggregate return of over 21 percent each year in euro terms.
“BAT has a strong cash flow from its global business, and has provided Reinet with dividends of over 264 million pounds, or $412 million at current exchange, over the past three years,” Rupert added.
A shareholders’ meeting to approve the proposed revision to the prospectus will be convened in March, the statement said. Reinet has a broad base of investments including listed and unlisted companies, bonds and real estate.