Brait has announced plans for a R2.5bn rights issue to lower its debt and and to pay its portion of a separate rights issue in Virgin Active.
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Brait, the investment group that has South African entrepreneur Christo Wiese as its biggest shareholder, is planning a R2.5 billion rights offer ahead of a listing of Virgin Active Group.
In its annual results for the year to March 31 on Thursday, the company said that it is in the final stages of a strategy to unlock value for shareholders through the distribution of its remaining assets to shareholders, and that the rights offer is part of this strategy.
Brait’s share price fell by more than 11% to 204 cents on the JSE after announcing the rights issue and despite a strong financial performance over the past year by the company's investments.
The rights offer will be priced at R1,510 per share, a 43% discount to net asset value post the offer, and a discount of 25% to the ex-rights price (TERP) based on the 5-day volume weighted average price (VWAP) of R2,233 prior to this announcement.
Brait's directors said what still needs to be done in their value unlock strategy is for Virgin Active to be positioned for a listing or sale of the business, the stake in the UK retail chain New Look to be sold, and residual debt to be repaid to facilitate the unbundling of the remaining listed assets to shareholders. The investment in Virgin Active makes up 54% of Brait's net asset value.
Virgin Active plans to raise £175m (R3.81bn) from its existing shareholders to lower existing debt, and Brait intended to contribute £108m to fund its pro-rata share of the Virgin Active Capital Raise.
The Virgin Active capital raise will allow it to fund its club refurbishment plan and new club roll-out strategy.
Virgin Active is also in the final stages of refinancing its South African and international facilities which, together with the capital raise, will result in an interest saving of £14m per year.
Since March 2020, Brait has reduced its net debt from R7bn to R1,7bn currently. This was done through disposals of underlying assets and the listing and monetisation of the company's stake in foods and consumer goods group Premier.
“To optimise Virgin Active for a potential listing, it is preferable that the business repays some of its existing debt in order to achieve a suitable level of gearing,” Brait’s directors said.
After the rights offer, Brait intended to redeem its convertible bonds for £138m. During the previous financial year, Brait monetised part of its stake in Premier, raising R1,8bn through a market placing of shares.
The rights offer and the Premier proceeds, together with an increase in the existing revolving credit facility - undrawn as at March 31, 2026, would fund the convertible bond redemption and Brait's contribution to the Virgin Active capital raise.
The group's underlying assets performed strongly in the 12 months to end-March, with year-on-year earnings before interest, tax, depreciation, and amortisation (EBITDA) growth of 37% for Virgin Active, 18% for Premier, and more than 100% for New Look.
The directors said that after all these transactions are concluded, Brait will have significantly reduced its debt, removed the exchange rate risk of the UK pound-denominated convertible bonds, and will have three well-capitalised businesses that are performing strongly and appropriately positioned for exit optimisation, or unbundling.
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