Richemont plays for new riches: Deft marketing has created a tobacco dynasty to rival the Oppenheimer empire

Click to follow
The Independent Online
JOHANN RUPERT is hardly a household name in Britain, and that is the way he prefers it. But the reclusive South African tobacco magnate drew much attention last week, as the City pored over plans to restructure Rothmans International, the tobacco business controlled by Richemont.

As managing director of Richemont and executive deputy chairman of Rothmans, the 42-year-old Rupert almost certainly masterminded the proposed separation of the group's tobacco and luxury goods interests. This involves splitting off Rothmans from Dunhill, the luxury goods company in which it has a 57 per cent stake. Two quoted groups with dual British and foreign holding structures will be created in their stead.

The tobacco group will retain the Rothmans name, while the luxury goods businesses, including Dunhill, Cartier and Karl Lagerfeld, will trade as the Vendome group. Both will be controlled by Richemont, with a 61 per cent shareholding in Rothmans and a 70 per cent shareholding in Vendome.

This rationalisation of Rothmans' sprawling and convoluted structure, due to be accomplished by the end of October, will be accompanied by a pounds 525m cash payout to shareholders, in proportion to their interests in the companies. Richemont will get nearly pounds 300m for its 62 per cent stake in the old Rothmans.

The news was greeted with some disappointment in the City, where Rothmans shares had soared on Tuesday, as rumours of the restructuring leaked out - allegedly from South Africa. The shares were eventually suspended until details of the plans were provided on Friday, together with Rothmans' pre-tax profits of pounds 614m for 1993. The City's response, said Clive Richardson, of Henderson Crosthwaite, 'reflects the price/earnings ratio at which the tobacco stock might be rated'. For Rupert, its reaction - to mark down the share price by some 70p (including the price reached in after-market trading) - must have been disappointing.

Yet Richemont, which his family in effect controls although it has less than 10 per cent of the equity, is only part of the empire founded by Johann's father, Anton, and built up in the course of the past 50 years.

Now 76, Anton Rupert is a venerated figure in Afrikaner business circles and a long-standing rival to Harry Oppenheimer, the head of Anglo-American and De Beers. But in the 1940s, when he founded a small tobacco company called Voorslag Tabac after graduating from Pretoria University, he was an unknown entrepreneur. He had a gift for marketing, his company flourished and within less than a decade he had formed the Rembrandt Group, the vehicle with which he expanded from tobacco into banking, mining, food and forestry.

In the late 1950s, he started to trade outside his native South Africa and in 1972 took a 60 per cent stake in the newly formed Rothmans International, via the investment company Rothmans Tobacco Holdings. Rothmans in turn owned a controlling stake in Dunhill, and Anton Rupert subsequently made a number of acquisitions in the luxury goods sector.

Two events in the late 1980s helped to shape Rothmans' future. In 1988, together with his son Johann, who graduated from Stellenbosch University with a degree in economics and is reputed to have trained as a merchant banker, Anton Rupert founded Richemont. The Swiss-based company, in which the overseas assets of the Rembrandt Group are vested, was clearly designed to protect the group's foreign interests from political turmoil and is now the key rand hedge stock.

A year later, Philip Morris sold its shareholding in Rothmans to Richemont, handing back control to the Rupert family.

But if Anton Rupert has become an illustrious businessman, his youthful political affiliations are rather darker. Those connections go back to 1939, when he became involved with the business branch supporting the National Party, which won power in 1948 and has retained control ever since. He also enjoyed close liaisons with members of the Afrikaner Broderbond, a secret, quasi-Masonic organisation with enormous political clout.

Gradually, however, he distanced himself from such associates, and in particular from Hendrick Verwoerd, the architect of apartheid and then prime minister. The two men had quarrelled because Rupert wanted to extend his business to the newly created African homelands. But Verwoerd prohibited the move on the grounds that, in keeping with the apartheid ethos, the homelands should be purely African.

However, Anton Rupert has continued to enjoy considerable political influence. He was on good terms with John Vorster, Verwoerd's successor, while his son is a friend and keen supporter of F W de Klerk. Johann Rupert, who now lives in Britain, is also known to be a fervent admirer of Margaret Thatcher.

But even friends in high places could not prevent the tarnishing of tobacco stocks - and with them, Rembrandt - in the 1980s, as public hostility to smoking grew. Once again, the Ruperts proved deft marketeers, with a series of philanthropic projects to sponsor arts, nature and small business development foundations.

Since the mid-1980s, the Rembrandt group has also expanded into medical care, with at least 20 privatised hospitals, prompting rather morbid jokes in certain circles that it only needs to acquire a maternity hospital and an undertaker's business to offer services from the cradle to the grave precipitated by smoking.

Despite the jokes, however, one thing is certain: the Ruperts have been hugely successful.

(Photographs omitted)