Johannesburg - South African investment heavyweight Brait has announced that it intends to seek a premium listing in London with the aim of boosting its profile and tapping deeper pools of capital.
Brait, the owner of gym chain Virgin Active and UK budget clothes retailer New Look, said it would also move its head office to the UK from Malta.
The board believes that a premium listing in London and inclusion in the FTSE UK index series, if achieved, will enhance the profile of Brait, improve the liquidity of dealings in its shares and improve its access to a wider range of international investors.
Concerns
The group announced the decision almost three months after the UK voted to leave the EU.
Will Brexit affect the company in the long run?
Read also: Brait seeks London listing
Citadel chief strategist Adrian Saville does not think so.
“The short answer is that the way UK equity and bond markets have repriced since June suggests that Brexit concerns are overstated.
“Even if economic growth in the UK decreases as a result of leaving the EU, London will remain a strong region with excellent access to capital, skills, networks and markets.
“For this reason, Brait’s decision to seek a premium listing in the UK in spite of Brexit should not negatively affect the company in the long run and, if anything, probably promote the firm’s prospects. The truth is, London will remain an economic powerhouse regardless,” Saville said.
According to the Brookings Institution, London has the fifth-largest metropolitan economy in the world. The city of London generates 22 percent of the UK’s gross domestic product.
The Brait board believes that the proposed transfer and a premium listing in London if achieved are in the best interests of the company and shareholders.
Saville said given the economic opportunities the move to seek premium listing in London was understandable from an economic point of view.
Good sense
“The observation is that companies such as Old Mutual and Lonmin came under pressure for running London offices while having operations in South Africa.
“If Brait’s intention is to grow in Britain and Europe then surely the opposite holds and it makes good sense to seek a premium listing there,” Saville said.
Ron Klipin, a portfolio manager at Cratos Wealth, also agreed with Saville.
“It makes sense for Brait to seek a premium listing because 80 percent of Brait's businesses like Virgin Active and New Look are UK-based or have origins in that country. I also think moving to London will create a deeper pool of liquidity if the company has a dual listing.
“In terms of sourcing funding, Brait will have additional options in capital markets where borrowing costs will be less than that of South Africa,” he said.
He added: “Brait will also be able to pick up cheap UK assets because of Brexit.”
Brait traded 1.61 percent higher on the JSE yesterday, closing at R117.06.
BUSINESS REPORT