Compagnie Financiere Richemont S.A. (CFR) announces that it is proceeding with a restructuring of its businesses to create a focused luxury goods business and a separately-listed investment vehicle.

The restructuring will result in the distribution of 90 per cent of Richemont's interest in British American Tobacco p.l.c. (BAT) to its shareholders.

The restructuring proposals are subject inter alia to the approval of the shareholders of CFR, and the holders of participation certificates (“PCs”) of Richemont S.A., Luxembourg. They are also subject to the approval of shareholders of Remgro Limited (“Remgro”), Richemont's co-shareholder in R&R Holdings S.A. (“R&R”), which holds the combined interest of Richemont and Remgro in BAT. Today, Remgro has also announced proposals for the distribution of 90 per cent of its interest in BAT.

The restructuring addresses the changes to tax legislation in Luxembourg, which would make the current group structure significantly less attractive to Unitholders from 31 December 2010 onwards.

Key elements of the proposed restructuring
• Richemont units, comprising shares issued by CFR and PCs issued by Richemont S.A., will be de-twinned on 20 October 2008 to create two separate entities:
- CFR will become a focused luxury goods business, holding all of Richemont's luxury assets; it will continue to be headquartered in Geneva and listed on SWX Swiss Exchange; it is expected to remain in the blue-chip SMI index of leading Swiss stocks;
- Richemont S.A. will be converted into a Luxembourg investment vehicle listed on the Luxembourg Stock Exchange, to be renamed Reinet Investments S.C.A. (“Reinet”) , which will focus on long term capital growth;

• On 3 November 2008, 90 per cent of Richemont's interest in BAT, being some 351 million shares representing 17.5 per cent of the ordinary capital of BAT, will be distributed to Reinet shareholders; the remaining 10 per cent of the BAT shares, some 39 million shares being 1.9 per cent of the ordinary capital of BAT, will be retained in Reinet; a further 1.1 per cent of the ordinary capital of BAT (some 21 million shares) will be contributed by Remgro on the same terms in exchange for Reinet Depository Receipts (“DRs”) for distribution to its shareholders; at this point, Reinet will hold some 60 million BAT shares and approximately €407 million of cash and other investments;

• Reinet will subsequently launch a rights issue whereby shareholders can subscribe for Reinet shares using BAT shares. It is expected that shareholders will be able to subscribe for four new Reinet shares for every five shares held; the precise terms of the rights issue, including its size and the subscription exchange ratio, will be determined immediately prior to its launch. Rupert family interests have committed to underwrite the entire rights issue and, through a subsequent placing of Reinet shares at NAV per share, will be able to contribute into Reinet any remaining BAT shares that they hold; and

• Richemont DRs DRs will be separated into CFR DRs and Reinet DRs. Richemont DR holders will also participate in the restructuring and receive BAT shares. Linked to this, Richemont and Remgro have formally requested BAT to obtain a secondary listing of its shares on the stock exchange in Johannesburg (the “JSE”), thus fulfilling an undertaking given by BAT in February 2007.

Comment from the Executive Chairman of Richemont
Commenting on the proposals, Mr Johann Rupert, Executive Chairman of Richemont, said: “We have undertaken a detailed review of the alternatives open to the Group in the light of the need to restructure prior to the end of 2010. The proposals separate the luxury businesses from the investment holding activities and establish Compagnie Financière Richemont as a focused, Swiss luxury goods company. This reflects the significant development of the luxury business since we established Richemont 20 years ago and, indeed, since 1999, when we merged Rothmans International with BAT.

CFR will continue as a significant global company in its own right and will have a strong balance sheet with the financial resources to allow it to continue to grow both organically and, potentially, through acquisitions.

Reinet will be an investment vehicle which will invest in a broad-based portfolio of asset classes targeting long term capital growth.

Finally, Unitholders will obtain direct access to 90 per cent of Richemont’s interest in BAT.”

Benefits of the proposed restructuring
• Unitholders will be able to hold and trade separately their investments in the luxury goods businesses and BAT currently held through Richemont; CFR as an independent entity will continue to be one of the world’s leading luxury goods companies, with strong Maisons, broad geographic diversification and significant financial resources;

• The separation of the investments in the luxury goods businesses and BAT should contribute to the elimination of any holding company discount inherent in the current Richemont unit price;

• Reinet will allow its shareholders to participate in a listed vehicle controlled by Rupert family interests, which will have an investment strategy aimed at long term capital growth;

• The rights issue will provide Reinet shareholders with the choice of either subscribing for additional Reinet shares in exchange for BAT shares or selling their warrants on the Luxembourg Stock Exchange or the JSE.

Courtesy: Compagnie Financiere Richemont S.A, Switzerland

Add a comment

Posted by Naresh Koshti on 8 August, 2008 11:54:40 AM IST #