Shares in investment holding company Brait [JSE:BAT] slumped by 14% in early trade on Wednesday morning after it announced plans to raise up to R5.6bn in equity to reduce its debt.
Businessman Christo Wiese is the biggest shareholder in Brait, which owns Premier Foods, Virgin Active and the UK retailer Iceland, as well as struggling UK clothing group New Look.
In an update to shareholders, Brait said it intends to undertake an equity capital raise of between R5.25bn and R5.6bn. This will comprise a fully underwritten rights offer of R5.25bn, and a specific issue of shares of up to R350m at the rights offer price.
Brait shares were trading at R14.19 at 10:42 on the JSE, down 14%.
Brait said that its core portfolio of investments were undervalued due to the "current high levels of debt on Brait’s balance sheet and concerns over Brait’s ability to meet its debt obligations".
After the proposed recapitilisation, which also includes the refinancing of borrowing facilities, Brait said a new board will be constituted and proposed to shareholders for approval at its Annual General Meeting in July 2020.
This new board would drive a new strategy, it said.
"Brait’s strategy has been that of a strategic, long-term investment holding company seeking to drive growth and value creation via its portfolio of sizeable, unlisted businesses in the broad consumer sector, targeting growth in net asset value and the realisation of its assets at the appropriate time."
"The board has resolved to adopt a new strategy focused on maximising value through the realisation of its existing assets in its portfolio over the next five years and returning capital to shareholders."
The group also announced that its board had selected Ethos as its new strategic equity partner.
'The Equity Capital Raise will see the introduction of Ethos as a new strategic equity partner through its investment of [R1.35bn] in Brait," it said.