Ethos Capital and Brait stand at a crossroads, with the uncertain prospect of the imminent unbundling by the former of its stake in the latter providing a fresh opportunity to redefine their market positions.
Investment holding company Ethos announced on Monday that its board had opted to distribute its Brait stake directly to its shareholders
This comes as both companies scramble to survive the unstable market, with Ethos’ market cap dwindling to R1.2bn and Brait’s share price plummeting 52% so far in 2024.
According to the announcement, the unbundling will see Ethos shareholders receive 0.50857 Brait ordinary shares for every Ethos Capital share they hold, translating to an approximate value of 48c per share based on Brait’s closing price on June 21.
“Ethos Capital shareholders who transfer or dispose of their Ethos Capital shares prior to the last day to trade in Ethos Capital shares in order to be eligible to participate in the Brait unbundling, currently expected to be July 9, will not participate in the Brait unbundling and will not receive the Brait ordinary shares,” the company said.
Outgoing Ethos CEO Peter Hayward-Butt, who recently resigned, has long highlighted the need to unlock value within the portfolio. The strategy for Brait, which has been grappling with losses for years, has focused on the realisation and unbundling of its portfolio companies, such as Premier Group and Virgin Active.
Despite these efforts, investor sentiment has been cautious. During an investor call late in 2023, investors questioned the tangible benefits for Ethos shareholders following a R7.8bn value unlock at Brait.
Hayward-Butt emphasised that unbundling could eliminate discounts and potentially unlock fundamental value, particularly as Brait’s market capitalisation mirrors its stake in Premier, Business Day reported at the time.
Brait, chaired by billionaire Christo Wiese, has also been pursuing a recapitalisation plan, including a R1.5bn rights offer. This plan aims to extend bond maturities and adjust convertible bonds to boost liquidity and prepare for potential exits from its investments.
The proposed rights offer, and recapitalisation signals the urgency of stabilising Brait’s financial health amid a precipitous five-year share price tumble of 95%.
Hayward-Butt is due to be replaced by Anthonie de Beer from July 1.
“Anthonie has been with Rohatyn Management SA (and Ethos Private Equity before that) for over 22 years in various roles including as the managing partner for the large private equity funds. He has intimate knowledge of the Ethos Capital asset base and strategy,” the company said.
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