Brait shares jump nearly 30% on sale of stake in Iceland Foods

BRAIT SE accelerated nearly 30 percent on the JSE yesterday after the Christo Wiese-owned investment group announced the sale of its 63.1 percent shareholding in Iceland Foods for £115 million (R2.45 billion).

Brait said it disposed of its entire exposure in Iceland Foods, effective yesterday.

It said the transaction would be cash payable in three instalments, with the first £60m today, and the remaining £26.9m and £28.1m on July 30, 2021, and July 29, 2022, respectively.

In November, Brait said that it was planning to focus on maximising value through the realisation of existing assets over the next five years.

Brait also owns about 80 percent of gym group Virgin Active and is invested in Premier Foods.

The group said it sold 243.57 million shares in Iceland Foods to a newly formed company, wholly owned by Sir Malcolm Walker and executive chairperson Tarsem Dhaliwal.

Brait acquired Iceland Foods through a small stake in 2012 and the remainder in 2015.

Yesterday the group said that Iceland Foods’ management had expressed an interest in owning 100 percent of the business for some time, and diligent cash management, combined with a reduced capital expenditure programme, had provided sufficient liquidity to enable them to do so.

Brait’s carrying value for its stake in Iceland Foods at March 31 was £62.5m at the closing exchange rate of R22.17 to the pound.

Iceland Foods was founded in 1970 by Walker, and the sale returns the business to being fully owned by its founder and the management team.

Its earnings before interest, depreciation and amortisation for the year to the end of March were £134m, while net debt was £705m at year end.

Brait said that it planned to use the proceeds from the Iceland Foods disposal to partially repay the revolving credit facility held by subsidiary Brait Mauritius.

It said that its net asset value (NAV) per share at the end of March was anticipated to be between R8 and R8.50. This compared to the unaudited interim NAV per share of R38 reported at September 30, 2019.

The issue of 848 million new shares pursuant to Brait’s R5.6bn equity capital raise concluded in February 2020, had reduced this interim NAV per share to R17.46.

The further reduction in the guided NAV range was driven by a fall in valuation multiples following the impact of coronavirus, and the impact of coronavirus on the portfolio company profitability and outlook.

Brait’s stake in Virgin Active accounted for more than half of its investment portfolio, which stood at just less than R30bn at the end of September 2019.

Gyms have been closed across the regions in which Virgin Active operates, and shareholders had recently approved a £20m loan to the gym group, of which Brait’s share was £16m, to help it through the pandemic.

Virgin Active was also in discussions with lenders about waiving debt covenants and increasing the size of debt facilities, Brait said.