Imperial CEO Sees Split at Risk From South African Turmoil

  • Separation of vehicles, logistics can wait if market is ‘hell’
  • Major investors support unbundling, scheduled for next year

Imperial Holdings Ltd. Chief Executive Officer 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 transportation businesses into two Johannesburg-listed entities “is taking up 30 percent of top management’s time,” the 67-year-old executive said in an interview on Tuesday. The company will start the process in 2018 unless “the market goes to hell, then we obviously have to say the situation is not appropriate.”  

Mark Lamberti

Photographer: Waldo Swiegers/Bloomberg

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 South African retailer Massmart Holdings Ltd. has since reorganized the businesses through a series of disposals and acquisitions and set up separate management teams.

He plans to leave Imperial either at the time of the unbundling or, if that’s delayed, after delivering full-year earnings figures in about August 2019, 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 percent this year, valuing the company at 39 billion rand ($2.9 billion). That compares with a 10 percent rise on the FTSE/JSE Africa All-Share Index.

Political Uncertainty

Imperial’s auto 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 are only held together 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 Johannesburg’s stock exchange, 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 through June 2018. In December this year, South Africa’s ruling African National Congress is scheduled to elect a replacement for its party head and national president, Jacob Zuma, a decision that will influence how investors view the country’s prospects.

No Quick Fix for South Africa’s Frail Economy When Zuma Goes

The firing of Finance Minister Pravin Gordhan in March triggered credit rating downgrades by S&P Global Ratings and Moody’s Investors Service.

Lamberti has overseen the sale of 42 businesses and 52 properties as of the end of June and the disposal drive is largely completed, Lamberti said. Recent acquisitions have included the U.K.’s Pentagon Motor Holdings for 493 million rand, a price the company negotiated down due to the impact of the Brexit vote, the CEO said.

The separation of the Imperial businesses is 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. “If you were starting with a clean slate you would never say let’s put them together.”

— With assistance by John Bowker, and Antony Sguazzin

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