CAPE TOWN – BRAIT shares jumped the most in 24 years on speculation that it plans to sell a stake in fitness chain Virgin Active.
The share price soared up to 16 percent to R13.24 just after midday on Friday, valuing the company at R6.7 billion after Sky News reported online, citing unnamed sources, that global investment bank Morgan Stanley had been appointed to find a buyer for a stake in Virgin Active. The shares closed at R13.21.
Virgin Active accounts for 55 percent of Brait assets.
The fitness chain has about 240 clubs, with some 1.2 million members across eight countries, including the UK, Italy and South Africa. Brait declined to comment on the matter on Friday.
The plan to sell a large component of the investment company's assets follows the annual general meeting last Wednesday where, according to an analyst who chose to remain anonymous, some shareholders had clearly expressed dissatisfaction with the way the company was performing.
Some 30 percent voted against the re-election of entrepreneur Christo Wiese, the former chairperson of Steinhoff Investment Holdings and who holds 36 percent of Brait as non-executive director, while there was a more than 90 percent vote for the other directors.
Also, a new management incentive scheme was withdrawn before the meeting. Bloomberg News reported that a number of options were being explored for the Virgin Active stake, with the most likely outcome expected to involve a stake acquired by a long-term capital provider such as a pension fund or sovereign wealth fund. The analyst said the stake might also prove valuable for a private equity firm.
It is unclear what valuation would be attached to Virgin Active. Brait’s other assets include UK-based supermarket Iceland Foods, a minority position in the fashion retailer New Look and a 96 percent stake in consumer goods and food group Premier.
At March 31, 2019, Brait’s investments were worth R32.6bn, the value of which had fallen more than 18 percent from R40.1bn at the end of September 2018.
A convertible bond and borrowings come to more than R12bn.
Brait’s share price has slumped by more than 70 percent in the past 12 months, adding to a steady decline since 2016 when the share price peaked at more than R170.
Net asset value at March 31, 2019, was R41.80 per share, a figure that had slipped from R55.23 on September 30, 2019.
On Virgin Active, the analyst said health clubs and gyms were under pressure at present in South Africa, given the increasing popularity of a range of other fitness options such as Crossfit and outdoor events such as trail running.
That was apart from the impact on new member numbers of the very weak economy.