Brait idea could create colourful rescue team
The Arbiter Project would see two of SA’s most colourful business personalities come together in an bid to rescue investment holding company Brait from a prolonged period of value destruction.
Everyone involved stresses it is still very early days, and the proposal might never see the light of day. But the prospect of Christo Wiese and Brian Myerson (along with Mergence Investments) playing lead roles in what would be a high-profile commercial transaction is, from a media perspective, delightful.
SA-born Myerson, cofounder of Principle Capital in 2004 and an extremely active UK activist investor for years, has had a fairly low profile since 2010 when UK takeover authorities banned him for three years. Such bans authorities happen about once in 20 years or so.
While Brait’s future might not be precisely as laid out in the Arbiter document, there’s no doubt the next few months will be dramatic for this once highflying investment company.
It is remarkable that nothing significant has yet been done to sort out its near-crippling problems, including hefty debt and generally poorly performing operating assets or, as with UKretailer New Look, dismally performing ones.
Virgin Active is its most attractive asset and, in the Arbiter plan, set to be the base for a new-look Brait. A competing proposal mentioned by analysts is to sell Virgin, to relieve debt, combined with a concerted attempt to improve performance of operations, rather than sell them in a weak market.
Valuations in the Arbiter document suggest Wiese, Myerson and Mergence see little of this market weakness. Brait’s stake in Premier is valued at a rather ambitious R6.9bn, and in Iceland Foods at a steep R3.1bn.
NATIONALISING MINES
Events at Kabwe, a defunct Zambian mine, hold an important lesson for SA and those calling for the nationalisation of the resources sector. Anglo American SA, local arm of the globally diversified miner, faces a class-action lawsuit by communities around the mine afflicted by lead poisoning.
Anglo says the Zambian government nationalised the mine in 1974 and ran it for 20 years before it was shut.
Why would lawyers go after Anglo and not mention the Zambian government’s role in running the mine and what happened in managing the environmental legacy?
That will surely be discussed if the matter comes before an SA court and will certainly be raised by Anglo in its defence.
Nationalisation nearly ruined Zambian copper mining.
This week, parliament heard of government-run diamond mine Alexkor’s dismal state. It has been all but destroyed, cannot pay workers and is asking the government for money.
In Botswana, the fiasco at BCL, state-run nickel miner and refiner, is further evidence that state participation in mining is not a good idea. BCL is suspended and under administration, a politically charged and fraught process, potentially embarrassing for the government.
Kabwe raises an interesting point for SA and proponents of mining nationalisation. Who pays when things go wrong? Who carries the cost of correcting environmental legacies? Does the state take on that responsibility as any new owner would? Court argument and the ruling on Kabwe should provide fascinating answers.