MONEYWEB: Well Paul, before we go into what happened on the markets, that Gilbertson story is a cracker, isn't it? R50m cash, he gets R2m bucks because of his inconvenience in relocating - and then he gets a pension of R650,000 a month. It comes at a most unfortunate time, though, with much of the publicity around the world now attacking excessive or apparently excessive payouts.
PAUL THERON: Look, Brian Gilbertson is a hard-core guy in a deal situation, and he showed this in terms of his own exit negotiations with the group.
Clearly his contract was written and well defined, and my sense was when it was made clear that the agreement had not yet been released, that something of this ilk was coming. I think the group has really been made to pay for the fact that he was removed from that office early on, and you'd have to say that these are big numbers but, at the same time, this is probably what the guy would have earned if he had stayed in the job to the conclusion of his contract.
MONEYWEB: How do you actually justify R650,000 a month in pension? For the rest of your life. It could be 50 years.
PAUL THERON: It's fantastic for him, you'd have to say. It's going to be interesting to see what shareholders do in terms of the financial effect of that on the company going forward, because clearly this is something that they have to pay and then they have to pay for the current chief executive to do the job as well. Perhaps you could say it's a little over done but I mean in the global environment MONEYWEB: But that's where the problem comes - in the global environment, Paul. If you do your research on the pension funds, all these defined-benefit funds that they have in the UK and the US, they're so deep under water now because of precisely this kind of thing - where you get 75% of your salary.
Now for guys like you and I, who'd be kind of down at the bottom rung, it really wouldn't hurt the company much but when you're paying out these kinds of figures to the executives, it's got to be a huge drain on the pensioners of tomorrow.
PAUL THERON: Look, when he got the deal and when he was made the chief executive and pulled off the BHP merger, the kind of numbers that were being talked about where pretty substantial for any South African executive. But within the global environment, where one looks at US dollar salaries of those kinds of people, this is not that out of line. Now you may well say, look, executive remuneration is just on a complete bender and this is all complete nonsense, but that has to take its course. We'll have to see to what extent within global capitalism shareholders really seriously get together and put a stop to this kind of thing because, as far as it goes right now, it would certainly seem that boards around the world think that this kind of level of remuneration is not only adequate, but required to keep these kinds of people.
MONEYWEB: Good point there. I don't how many people will agree with that one. SAB's results - how did the market react?
PAUL THERON: Well, the share prices were down. Clearly Breweries trades principally these days in London and in the LSE they were down 3% and locally, with the slight currency adjustment, they were down just around two and a bit.
My sense is the results were good. Everybody knows that the Miller operations have been taking strain. Everybody knows that they've been losing market share - that's why Phillip Morris sold the business to SAB, because SAB held themselves out as the guys that could fix Miller and the smartest guys in beer brewing around the world. Now the jury's out - they've got to go out and prove that. I think, on the whole, over the last couple of months, Breweries has built a nice new fresh support base at around these levels. In London it's been improving.
MONEYWEB: The share price?
PAUL THERON: The share price. And my sense of it is that today's reaction was a little bit of buying on the sense that the news was not going to be all bad.
And what we've seen today is a little bit of a marking back, but certainly I feel it's a long-term buy. I'm very comfortable with Breweries' global plans and they're doing very well in the rest of the world. They've sent their best brains to Milwaukee to go and work that particular case.
MONEYWEB: Well, at least one of them.
PAUL THERON: Yes, one of the others is also a financial guy there - look, maybe I'm being a bit starry-eyed here because they're a global South African player, and I want them to succeed. I'm ever-optimistic. But certainly my sense is you don't necessarily want to be buying these for a short bounce, but over the next two to three years we expect them to do well.
MONEYWEB: The tobacco stocks did particularly well yesterday. They followed through today on the judgment in a Florida court that overturned a previous award against the tobacco companies. Do you think it can be sustained with rebound?
PAUL THERON: Look, I hate the tobacco stocks, quite frankly, as a long term MONEYWEB: But you love the beer stocks? It puts you in a nice little pigeonhole hey?
PAUL THERON: I just think tobacco stocks have got to go. I mean, quite frankly, Phillip Morris has been under terrible pressure the whole year in the US. It was up by 10% in the last couple of days. It's clear that this is a victory for the tobacco companies. Basically the court ruled that the class-action nation of the suit should be thrown out and it's no good, and it suggests that now in fact if you want to have a go at the cigarette companies you've got come back as an individual, and the problem with individuals is individuals are often under-funded and don't have the time to wait it out, while big tobacco ties them up in the court room for years and years and years.
But I just sense that, long run, it's not a good place to be. If you're investing for the long run - and I think most people should be - then I just worry about the long-term effects of holding stocks that make money from an industry which is going to consistently be faced with these kinds of legal challenges.