Wiese keeps his options open on Brait overhaul
• Advisory teams looking for a solution to debt and performance problems plaguing company
Christo Wiese is keeping his options open as advisory teams compete to deliver a solution to the chronic debt and performance problems plaguing Brait, which faces about R9bn in repayments over the next year.
At stake are hefty fees and the jobs of the investment company’s top management team after Mergence Investment Managers confirmed that it was working with Wiese’s privately owned Titan, the biggest shareholder in Brait, and activist investor Brian Myerson on a proposal to overhaul the company and clear out its leadership.
Brait moved this week to remind investors that it intended to play a key role in the restructuring, and said it was in talks with the billionaire about a plan that could involve refinancing debt, raising equity and selling off assets.
While he agreed with Brait’s statement that his Titan viewed the investment company, which has been battered by a disastrous bet on New Look, the UK retailer that it bought for more than R14bn just over four years ago and now values at zero, as a strategic investment, Wiese said he was also looking at other proposals.
“There is still a number [of proposals] on the table,” Wiese told Business Day on Tuesday.
He said two decisions had to be made, one about what Titan would do and the other about what to do with Brait.
He confirmed that Titan regards Brait as a strategic investment and “is committed to working with Brait and all other shareholders to get the best possible outcome”.
On Monday, Brait’s share price bounced 8% to close at a two-month high of R17.15 after the company informed shareholders that it was also in talks
with Titan. The directors of Brait and Brait Advisory Services have for several months been “engaged in an extensive process to materially reduce the debt on Brait’s balance sheet, which is part of the strategy of maximising shareholder value”, Brait said in a statement on the JSE’s Sens.
It said Titan had confirmed to Brait that it viewed Brait as a strategic long-term investment and intended to remain a significant and strategic shareholder in Brait.
“Titan is fully aligned with the board of Brait and supports working with Brait’s corporate advisers to implement the strategic initiatives.”
Last week, it emerged that Wiese had also teamed up with Mergence and Myerson to consider a R3bn rights issue, the installation of a new management team and the sale or spinoff of the company’s investments other than its 72% stake in gym chain Virgin Active.
The assets targeted for offloading include UK-based Iceland Foods, SA-based Premier, glass-packaging firm Consol and the bonds of New Look. Under this proposal, Wiese would tie up with Mergence and Myerson and, through a special purpose vehicle called Arbiter jointly control 49.9% of Brait’s voting rights.
A Brait spokesperson told Business Day that the company had not received any proposals from Mergence by Monday .
Also on Monday, Myerson told Business Day that Brait’s Sens statement had nothing to do with the Arbiter plan, declining to comment further on the proposal. “We can’t really say anything until things are firmer,” said the activist investor.
Earlier in 2019, disgruntled shareholders forced Brait to withdraw a R1.1bn plan to bail out executives as part of unwinding a 2011 structure to incentivise a select group of executives. Brait, which is facing debt repayments of R9bn between September 2020 and December 2020, is thought to favour the sale of Virgin Active and the retention of Premier and Iceland Foods.
Brait bought New Look about a year before the UK voted in a shock referendum in 2016 to leave the EU, playing havoc with consumer confidence and hitting a sector that was already struggling with the rise of ecommerce retailers such as Amazon.com.
Its troubles and value destruction have been another devastating hit for Wiese, who was the biggest shareholder in Steinhoff International when it nearly collapsed after the revelation of accounting fraud in December 2017.
Nic Norman-Smith, chief investment officer at Lentus Asset Management, said it was not a good time to be trying to offload assets in SA or the UK, “especially now that everyone knows they’re relatively keen sellers”.
Even after a 20% gain since September 18, Brait is down 43% so far in 2019, leaving it with a market value of R8.7bn.
In the same period, the JSE/FTSE Africa general finance index lost 4.9%.
R3bn the rights issue considered by Wiese and Mergence and Myerson