Brait stock jumps 6% on management buyout report

Shares in investment house Brait jumped as much as 6%, following a report the former private equity specialist’s controlling shareholder was mulling a management buyout, which would also bring in new investors. The proposal has all the characteristics of a classic boardroom battle, including the bitter falling out of industry titans who were once great mates.

According to a report in Business Day, the plan is that Christo Wiese’s Titan Nominees teams up with existing and new investors to inject R3-billion in a rights offer to recapitalise the struggling company.

Through the rights offer, Wiese, together with Mergence Investment Management would bring in Brian Myerson, an activist investor based in the UK, to revive the fortunes of the company currently led by chief executive John Gnodde.

Volumes traded more than doubled from the previous day’s 569,000 shares, adding 88 cents, to a high of R15.20 per share, before paring the gains to close at just under R15.00 on Thursday September 19. The company was valued at a market capitalisation of R9.5-billion.

However, Brait’s management denied there were any talks about corporate action at Brait at present.

“As we have said before, Brait remains committed to its investment strategy, materially reducing the debt on its balance sheet, and driving performance in its companies, with the support of excellent management teams.

“As of today, Brait has not received any proposals from Mergence Investment Managers, Arbiter or Brian Myerson. Should the board receive a proposal, it will evaluate it and respond in the interests of all shareholders.  We cannot comment on any speculation or rumours.”

Over the last three years Brait hit the skids after buying UK fashion house New Look in a debt-laden transaction just ahead of the Brexit fiasco, dragging down the share almost 90%. Brait has since sold down its 90% New Look stake, which used to be its biggest profit generator, to the current 18.5%. It had made the initial investment in 2015.

Among other investments, the company owns 96.1% of Premier Milling, which produces maize meal brands Iwisa and Snowflake bread flour. The Business Day article said under the new plan proposed by Wiese, Brait would sell off all its investments, including the Iceland Foods division, Premier and glass maker Consol.

Brait would only retain its 72% stake in Virgin Active, the gym club it acquired from UK billionaire Richard Branson a few years ago, said the newspaper.

Wiese, who lost more than R59-billion of his personal fortune in the December 2017 implosion of Steinhoff where he was the single largest investor and chairman, did not return a call from and text message from Daily Maverick seeking comment.

The proposed transaction shows the 78-year-old Wiese still has dealmaking ambitions.

In addition to turning around Brait, Wiese may yet be required to spearhead another turnaround project at grocer Shoprite, where he is the controlling shareholder through a share voting scheme.

Over the past three years Africa’s largest grocery chain has lost about 30% of its market capitalisation due to slowing economies across its major markets of Nigeria, South Africa and Angola. BM