Announcements in respect of Richemont's shareholdings in Vivendi SA and British American Tobacco plc
02 Dec 1999
Richemont, the Swiss luxury goods group, today issued the following announcements in respect of its shareholdings in Vivendi SA and British American Tobacco plc.
Shareholding in Vivendi fully hedged
In September 1999, Richemont exchanged its 15% interest in Canal+ SA for a 2.9% shareholding in Vivendi SA. Under the terms of that agreement, Richemont agreed not to sell its shareholding for a period of twelve months from the date of the transaction.
Richemont today announced that it has completed a hedging programme, as a result of which it has effectively locked in the value of its shareholding in Vivendi. Richemont intends to dispose of its Vivendi shares and unwind these hedging arrangements in September 2000. As a result, Richemont expects to receive, at that time, aggregate cash proceeds of approximately €1.200 million and report an exceptional gain in respect of this transaction of some €550 million.
Johann Rupert, Chief Executive of Richemont, said:
"When announcing the transaction with Vivendi earlier this year, we clearly signalled our intention to dispose of this investment in order to re-deploy the proceeds in the further development of our core luxury goods business. The hedging programme that we have now completed will provide us with certainty as to the value of our investment in a fast changing business environment, securing for our shareholders an excellent internal rate of return on our investments in the media sector."
Preference shareholding in British American Tobacco partially redeemed for cash
As a result of the merger of Rothmans International and British American Tobacco, Richemont and Rembrandt Group Ltd, through a joint holding company, hold a 35% equity interest in the enlarged BAT. The shareholding comprises 25% in ordinary shares and 10% in the form of 241.7 million convertible redeemable participating preference shares. The joint holding company, R&R Holdings SA, is held as to two thirds by Richemont and one third by Rembrandt.
As provided for in the merger agreement, up to half of the preference shares may be redeemed for cash in June 2000, being the first anniversary of closing, at a price of £5.75 per share, subject to certain notice requirements. In consequence, R&R Holdings SA today served notice to British American Tobacco of its intention to redeem one quarter of the preference shares (in total 60.4 million) in June 2000. The cash proceeds of redemption will therefore amount to £347 million, of which £231.5 million (€365 million) will be attributable to Richemont.
A further quarter of the preference shares (60.4 million) is eligible for redemption on the first anniversary of the merger. Should R&R Holdings SA wish such shares to be redeemed, notice must be given to BAT no later than three months prior to the redemption date of 7 June 2000. Any preference shares not redeemed on the first anniversary are to be compulsorily redeemed in cash on the fifth anniversary of closing in June 2004 at a price of £6.75 per share, unless previously converted to ordinary shares upon a sale to a third party.
Commenting on the decision, Johann Rupert, Chief Executive of Richemont and Chairman of Rembrandt, said:
"When we announced the merger in January of this year, it was clearly stated that Richemont and Rembrandt would have preferred our entire 35% interest in BAT to be in the form of ordinary shares, with full voting rights. In the absence of agreement on that point and as a result of negotiations, we reluctantly accepted that 10% of our interest in the enlarged BAT would be in the form of non-voting preference shares, redeemable at the latest five years after completion of the transaction. However, in exchange for effectively agreeing to become forced sellers in respect of a portion of our shareholding, we insisted on certain protection for our own shareholders. Key amongst these was the right to put a part of our holding of preference shares back to BAT at a fixed price after one year as an insurance against a general collapse of equity markets."
"Contrary to our fears, we have not yet seen a widespread fall in equity markets, but, regrettably, the share prices of tobacco companies have been very adversely impacted by the reaction to one specific legal case in the United States. As a result, the BAT share price has suffered considerably in recent months and we have concluded that, on balance, we should exercise the put option and, in so doing, achieve the protection that we sought at the time of the merger."
"Our confidence in the tobacco business in general, and in BAT in particular, remains undimmed. Martin Broughton and his team have done a superb job in implementing the merger so effectively and in such a short period of time. We continue to believe that the indicated cost savings and other operational and marketing synergies will be fully achieved as planned."