Investment counter Brait has certainly done more confounding than compounding over the past half dozen years.
For a business down to its last two significant assets in the form of its influential stake in consumer brands group Premier and majority share of health and fitness chain Virgin Active, the value unlock for long-suffering shareholders should be straightforward and fairly swift.
But it seems there is one final twist to navigate as the group enters its final stage of value unlock: another sizeable rights issue. This time it’s R2.5bn — a substantial sum measured against a market value of R8bn — pitched at 151c a share, which is a 25% discount to the share price before the announcement and a gaping discount to Brait’s latest NAV.
On paper, Brait’s remaining stake in Premier — which it sold down earlier this year to raise about R1bn — could, if sold off, raise enough funds to cull the remaining debt structures and leave enough change to continue funding Virgin Active’s flex into the broader wellness market.
Premier, which is earning a thick crust in the bread market, might not be such an easy sell for Brait. After taking over smaller food brands rival RFG Holdings, Brait is clearly banking on further upside in Premier over the medium term. That said, Premier’s share commands a 16 times trailing earnings multiple — more than the market gives sector stalwarts Tiger Brands and AVI.
That brings us back to the original premise of the “pending” value unlock. Clearly a lot more patience (and hopefully not more capital) is required if investors are still banking on a debt-free Brait unbundling its Premier stake, and Virgin Active listing on an international bourse.
