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Christo Wiese’s elite squad of corporate financiers bought New Look, a highly leveraged UK fashion retailer, just as the economy collapsed. The Brait share has been punished. Is this unjust, as most of the Brait portfolio is doing well, or a well-deserved

It’s not often that one of Christo Wiese’s companies sheds 50% of its value in one year. Especially a company that, barely a year before, was being touted as one of the burning-hot stocks of the JSE. Yet this is exactly where investment company Brait finds itself, less than two years after it clinched three of the most mouthwatering deals in recent history. First, in April 2015, it snapped up 80% of gym chain Virgin Active for R12.2bn (Richard Branson’s company holds the other 20%). A month later, it nabbed New Look, Britain’s second-largest retailer of women’s clothing after Marks & Spencer, for R14.1bn. And then for good measure, it took control of Iceland Foods — which sells frozen food and prepared meals in the UK, and is known for its “mums love it” tagline.

At the time, Wiese (75) lauded the 48-year-old New Look, which has 872 stores in 20 countries, as fantastic because “there are not abundant opportunities, so you have to look very carefully to find companies that tick all the boxes”.

Then Brexit happened. In June last year, to everyone’s surprise, 53% of Brits voted for the country to leave the European Union.

All high-street retailers took a beating. But New Look suffered more than most, with sales for the year to March falling 2.4% and pretax earnings by a whopping 31.8%.

The result: a shareholder stampede. In fact, since February last year, a few months after the New Look deal was done, R58bn has been wiped off Brait’s market value as the stock tumbled from R172 to around R60 today.

What really irked investors, however, is that a brash and ballsy Brait had valued New Look at R34.9bn in its books until last November. The retailer was the centrepiece of Brait’s sky-high net asset value (NAV) of R136, supposedly justifying the high market rating.

In June, when Brait released its results for the year to March, it revealed that it was now valuing New Look at just R7bn, against the R34.9bn of a year before. This tumbled Brait’s NAV to just R78.15. In recent weeks, Brait has further slashed its NAV, to R74.14.

It was brutal. Brait has never experienced such a sudden impairment in its 20 years of running private equity funds.

New Look’s value destruction raised sharp new questions about Brait’s dealmaking skills under the hitherto-untouchable John Gnodde, who worked at Goldman Sachs in London for six years until 1995, when he became a disciple of Brait’s founder and private equity guru Antony Ball.

Until that point, Gnodde and his team were heralded as having the knack of buying assets at exactly the right time. This was a blow to that image. But buying an asset for R14bn, then slashing its value to half that within two years, was never going to look great.

Speaking to the Financial Mail, Wiese defends Brait’s decision to buy New Look: “New Look was considered a very exciting investment just 18 months ago. Now people only see dark clouds. I know how quickly sentiment changes and I don’t measure success over such a short period.”

Perhaps. But Brexit was surely something that Wiese and

Gnodde hadn’t factored in when they began scouring the high street for bargains in 2015.

Today, Gnodde (52), a formidable investment banker at heart, has relocated to

London, so he can give more personal attention to New Look and plan Brait’s next step. He’ll have plenty of help, as KPMG has reportedly been hired to analyse New Look for potential cost savings.

What it means: Brait’s model relies on offering its shares at a high price. Until New Look’s future is resolved it’s unlikely to enjoy this luxury again