The support services sector is one of the smallest on the JSE. Yet it has attracted an unusual amount of attention as two of SA's largest empowerment deals have played out here.
Last year empowerment group Dinatla bought a 15% stake in Bidvest for R2,4bn, and on July 1 the Mvelaphanda Group will reverse its assets into Rebserve.
The question arising from the wide diversity of investments held by Bidvest and Mvelaphanda/Rebserve is whether it allows central management to add value or whether these companies are merely investment trusts.
The empowerment status of both groups is an additional variable. Both groups have decided to bring in black economic empowerment (BEE) partners at the holding company level rather than at operational level. Once again, critics argue, the black shareholders remain passive investors.
Both groups reject any suggestion that they are not in control at the companies they own. And Rebserve chairman Stephen Levenberg says: "The focus police might ask questions, but the real question will be: is it going to create value? And yes, value will be created."
Bidvest executive chairman Brian Joffe is a firm believer that diversity does not endanger the entrepreneurial spirit of the company, and that his overriding management principles can be extended to all outlying operations.
"We want to keep our group entrepreneurial and the best we can do is to keep it decentralised. It does not mean that our 2 500 business units don't have the same entrepreneurial belief - they do - but they are also autonomous, allowing them to get on with business," Joffe said in a recent interview.
He does not believe that an equity deal at holding level works against passing on operational experience to the empowerment partner, in this case Dinatla. "First of all the deal is at operational level as we own 100% of all our companies. Secondly it is important that SA has large BEE companies, not just a whole lot of smaller empowerment firms ," Joffe says.
Bidvest has built a reputation for making a success of most of its numerous acquisitions, but the verdict is still out on Mvelaphanda.
The Rebserve deal will create one of the largest black-controlled SA companies, with assets worth R4bn, extending into areas as diverse as mining (Gold Fields, Trans Hex, Northam Platinum), support services (Coin Security), banking (Absa) and health care (Afrox Healthcare). The staff of 20 or so at Mvela's head office will be stretched to add value at these companies, argue critics. Similarly, as Mvela plans to control R20bn in assets over the next five years, it will undoubtedly dilute the black shareholding in the firm.
Mvela could end up as nothing more than an investment holding company, trading at a significant discount to its underlying assets, as has been the case with most other JSE-listed investment trusts, the notable exception being Remgro.
The two other companies listed in the sector, packaging groups Nampak and Astrapak, have yet to outline BEE plans, but are unlikely to delay transactions much further. Astrapak CEO Ray Crewe-Brown says a BEE deal at equity level should be announced before the end of the September financial year-end.
