Wiese & Co gun for big Brait overhaul
Project Arbiter proposes backing a R3bn share sale and clearing out top leadership team
Christo Wiese has teamed up with other shareholders in Brait to propose a sweeping overhaul of the struggling investment house, including backing a R3bn share sale and clearing out its top leadership team.
The proposal, called Project Arbiter and seen by Business Day, comes at a time when Brait grapples with weak consumer demand and fierce competition in the UK that have weighed heavily on what was once the company’s biggest profit source, UK fashion chain New Look, and wiped off nearly 90% from its market value over the past five years.
Under the proposal, Wiese, who controls 46% of Brait through an investment firm Titan, is tying up with Mergence Investment Managers and veteran activist investor Brian Myerson to have Brait undertake a R3bn rights offer, install a new management team and launch the sale or spin-off of the company’s investments other than its 72% stake in gym chain Virgin Active.
If the deal is implemented, Wiese’s entity Titan would sell 50-million shares, or about a 21% stake, at the current market price to Arbiter, a special purpose vehicle to be set up by Mergence and Myerson’s company, Principal Capital.
The trio would jointly control 49% of Brait’s voting rights.
The assets targeted for offloading include UK-based Iceland Foods, SA-based Premier Foods, glass-packaging group Consol and the bonds of New Look. Proposed changes to the board of directors include the removal of long-serving director Chris Seabrooke as well as the immediate removal of the executive management team led by John Gnodde.
Myerson, who was involved in several high-profile activist assaults on UK companies
during the early 2000s, was banned by the UK Takeover Panel for three years in 2010 after taking control of a firm without making an offer to other shareholders.
Wiese referred Business Day’s request for comment to Brait’s head office in London.
However, he did tell the Financial Mail that nothing had yet been agreed upon by the various parties and that the Arbiter project was just one of a number on the table.
A Brait spokesperson told Business Day that as of Tuesday, “Brait has not received any proposals from Mergence. 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,” said the spokesperson, adding, “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.”
The proposal comes months after Brait said it would spend R1.1bn to bail out executives as part of unwinding a 2011 structure to incentivise a select group of executives, angering some shareholders over lack of consultation.
One analyst, who did not want to be named, said Brait had reached a critical stage and that determined and prompt action was required. The company has to repay R9bn of debt between September 2020 and December 2020. The current weak share price, negative market sentiment and tough economic conditions make this impossible without a major intervention. “It is clear that Brait needs to raise equity to de-gear, improve its liquidity profile and allow an optimal asset realisation process,” the Project Arbiter document says.
Bradley Preston, head of listed investments at Mergence, declined to comment further, saying only that his company continued to have discussions with various shareholders on its views on how to unlock value.