Wrap Text
Recapitalisation of Brait, introduction of new advisor, new strategy and withdrawal of cautionary announcement
Brait SE
(Registered in Malta as a European Company)
(Registration No. SE1)
Share code: BAT ISIN: LU0011857645
Bond code: WKN: A1Z6XC ISIN: XS1292954812
LEI: 549300VB8GBX4UO7WG59
("Brait" or the “Company")
NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, IN OR INTO
THE UNITED STATES, AUSTRALIA, CANADA, HONG KONG, JAPAN AND ANY OTHER
JURISDICTION WHERE SUCH PUBLICATION, DISTRIBUTION OR RELEASE OR MAKING OF THE
RIGHTS OFFER WOULD BE UNLAWFUL OR IN CONTRAVENTION OF APPLICABLE LAWS.
RECAPITALISATION OF BRAIT, INTRODUCTION OF NEW ADVISOR, NEW STRATEGY AND
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
ANNOUNCEMENT RELATING TO THE PROPOSED RECAPITALISATION OF BRAIT, THE
INTRODUCTION OF A NEW STRATEGIC EQUITY PARTNER AND ADVISOR, THE ADOPTION OF A
NEW STRATEGY AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
Shareholders are referred to the announcements released on the Stock Exchange News Service
(“SENS”) of the Johannesburg Stock Exchange (“JSE”) and published on the website of the Luxembourg
Stock Exchange (“LuxSE”) on 23 September 2019, 21 November 2019 and 27 November 2019, in terms
of which the Company announced that the board of Brait (the “Board”), together with Brait South Africa
Proprietary Limited and Brait Advisory Services UK Limited (collectively, its “Corporate Advisors”) were
evaluating options to materially reduce the current leverage, extend the remaining debt maturities on
Brait’s balance sheet and had resolved to adopt a new strategy that would focus on maximising value
through the realisation of its existing assets in the portfolio over the next five years and returning capital
to shareholders.
The Board has approved a recapitalisation plan that will result in Brait reducing its net debt by up to c.
ZAR5,300m via the following initiatives:
- a proposed partial repurchase of the existing GBP350m convertible bonds due on 18 September
2020 (“Outstanding Bonds”) to be funded by the issuance of approximately GBP150m convertible
bonds due in December 2024 (“Bonds”) and cash;
- an equity capital raise of at least ZAR5,250m and up to ZAR5,600m comprising a fully committed
and underwritten, renounceable rights offering of ZAR5,250m to existing shareholders on a pre-
emptive basis (the "Rights Offer”) and a potential non-pre-emptive specific issue of fully paid
ordinary shares of EUR0.22 each in the share capital of Brait of up to ZAR350m issued at the Rights
Offer price (the “Equity Capital Raise”); and
- a partial repayment and extension of the maturity of the existing Brait Mauritius Limited (“BML”)
committed revolving credit facility (“BML RCF”),
(collectively the “Recapitalisation”).
Pursuant to the Recapitalisation, EPE Capital Partners Limited, an entity listed on the JSE that invests
in, and alongside, Ethos private equity funds, and Ethos Private Equity Proprietary Limited (“EPE”), a
well-established private equity business that manages various alternative asset fund strategies and
investing through Ethos Fund VII GP (SA) Proprietary Limited (collectively, “Ethos”) will be introduced
as a new strategic equity partner and investment advisor to Brait through its participation in the Equity
Capital Raise. The Board will terminate the advisory agreement with its Corporate Advisors and enter
into an advisory agreement with EPE. The advisory costs and other operating costs of the Company will
be substantially reduced.
2. Rationale for the Recapitalisation
Brait has a core portfolio of distinctive, financially strong and cash generative investments that are
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. The Recapitalisation addresses this by providing Brait with a
significant quantum of new equity which will be used to reduce debt to a sustainable level. In addition,
Brait’s RCF will be restructured with an extended maturity.
The Rights Offer provides all Brait shareholders the opportunity to participate in any future upside in the
Brait share price as a result of a strengthened Brait balance sheet.
3. Details of the Recapitalisation
Brait’s net debt as at 30 September 2019 of ZAR11,965m includes two large debt maturities in 2020
comprised of:
- the GBP350m, 2.75% senior, unsecured Outstanding Bonds maturing on 18 September 2020; and
- the BML RCF maturing on 6 December 2020 which, as at 30 September 2019, is drawn at
ZAR6,402m.
The Board and its Corporate Advisors have engaged in an extensive process to materially reduce the
debt on Brait’s balance sheet which is part of the strategy of maximising shareholder value. These
processes have led to the Board approving the Recapitalisation plan comprising of:
3.1 The Outstanding Bonds and the Bonds
Today Brait will launch an offering of the Bonds and an invitation to bondholders to concurrently
repurchase up to GBP185m of the Outstanding Bonds. The net proceeds received (after deduction of
costs, fees and expenses related to the Bonds) from the Bonds together with cash on hand will be
used to fund the partial repurchase of the Outstanding Bonds. The partial repurchase reduces the
refinancing risk associated with the maturity of the Outstanding Bonds and extends the maturity profile
for the portion that is rolled into the Bonds. The balance of the Outstanding Bonds will be redeemed
at, or repurchased prior to, their maturity on 18 September 2020 with net proceeds from the Rights
Offer.
For further details, shareholders are referred to the announcement relating to the Outstanding Bonds
and the Bonds released on SENS on Wednesday, 27 November 2019. A further announcement will
be made once the final terms of the Bonds have been agreed.
3.2 The refinancing of the BML RCF
Rand Merchant Bank, a division of FirstRand Bank Limited (“RMB”) and The Standard Bank of South
Africa Limited (“Standard Bank”) as existing lenders under the BML RCF have agreed and signed a
credit approved termsheet to amend the terms of the BML RCF and extend its maturity by three years
from the date the binding, legal agreements are signed. The agreements will be conditional upon the
completion of the Rights Offer. The amendment and extension of the BML RCF is intended to achieve
the stabilisation of Brait’s balance sheet and provide time for the execution of Brait’s revised strategy.
Brait’s RCF lenders are supportive of the Recapitalisation.
3.3 The Fully Underwritten Equity Capital Raise
Brait intends to launch an equity capital raise of at least ZAR5,250m and up to ZAR5,600m comprised
of a fully committed and underwritten, renounceable Rights Offer of ZAR5,250m to existing
shareholders and a potential non-pre-emptive specific issue of shares of up to ZAR350m.
The Rights Offer will be implemented by way of the issue of renounceable (nil paid) rights to existing
shareholders (excluding shareholders in certain jurisdictions who are unable to satisfy Brait that their
participation would not result in a contravention of any registration or other legal requirement in any
jurisdiction), which will entitle such shareholders (or their renouncees) to subscribe for their pro rata
portion of new Brait ordinary shares (“Rights Offer Shares”). Arrangements will be made to the extent
practicable for the sale of entitlements on behalf of shareholders in certain restricted territories who
are not able to take up their rights. In addition, shareholders who subscribe for their full allocation of
Rights Offer Shares will be afforded the opportunity to subscribe for any Rights Offer Shares not taken
up by other shareholders. Brait ordinary shares held by Brait Investment Trust and BML which are
currently classified as treasury shares (“Brait Treasury Shares”), will not be entitled to participate in
the Rights Offer. As part of the Recapitalisation, the Board has proposed that the Brait Treasury Shares
be cancelled. Subject to shareholder approval this is expected to take place after the completion of the
Rights Offer.
The Equity Capital Raise will see the introduction of Ethos as a new strategic equity partner through
its investment of ZAR1,350m in Brait.
Ethos has entered into an agreement with Titan Financial Services Proprietary Limited and its affiliates
(“Titan”) whereby Titan will undertake in favour of Ethos to irrevocably and unconditionally, renounce
part of Titan’s entitlements to Rights Offer Shares with an aggregate subscription price of ZAR1,000m
in favour of Ethos and Ethos has irrevocably and unconditionally undertaken to subscribe for these
shares. Additionally, Ethos has entered into the Underwriting Agreement (defined below) with Brait in
terms of which Ethos will underwrite Rights Offer Shares not taken up under the Rights Offer having a
subscription price of up to ZAR350m. To the extent that Ethos does not subscribe for ZAR350m Rights
Offer Shares through its underwriting commitment in the Rights Offer, Brait will undertake a non-pre-
emptive specific issue of Brait ordinary shares of up to ZAR350m to Ethos (“Top-Up Subscription”).
Any Brait ordinary shares acquired by Ethos and Titan will be subject to a customary lock up for 90
days post the Rights Offer and may not be disposed of, whether directly or indirectly, without the prior
written consent of Brait.
Titan owns 188,730,749 Brait ordinary shares, equating to a 40.0% shareholding (excluding Brait
Treasury Shares), and is committed to investing up to ZAR1,000m in the Rights Offer via a combination
of following its rights (ZAR750m) and underwriting Rights Offer Shares not taken up under the Rights
Offer having a subscription price of up to ZAR250m. This demonstrates Titan’s commitment to Brait,
the Recapitalisation, the revised strategy and the appointment of EPE as the new corporate advisor to
Brait.
The net proceeds of the Equity Capital Raise (after costs, fees and expenses related to the Equity
Capital Raise) are intended to be used by the Company for the repayment of the remaining portion of
the Outstanding Bonds at or before their maturity on 18 September 2020 and to partially repay the
BML RCF and thereafter for general corporate and financing purposes.
The Rights Offer will be priced at a price per Rights Offer Share to be agreed between Brait and its
Underwriters (defined below), which in the absence of such agreement will be a 27% discount to the
theoretical ex-rights price of a Brait ordinary share, subject to a maximum price of ZAR9.40 and a
minimum price of EUR0.22, being the nominal value of the new shares.
Brait has secured irrevocable commitments from shareholders holding 67.1% of the Brait ordinary
shares outstanding (excluding the Brait Treasury Shares), subject to certain exceptions for compliance
with investment mandates, to vote in favour of the resolutions to be proposed at an Extraordinary
General Meeting of shareholders of the Company to be held on 14 January 2020 (the “EGM”) to
secure all the necessary approvals required to implement the Equity Capital Raise and issue shares
to satisfy conversion rights in relation to the Bonds. In addition, Brait has received non-binding
indications of support from shareholders representing a further 3% of Brait ordinary shares outstanding
(excluding the Brait Treasury Shares). Approval from at least 75% of the Brait shareholders
represented at the EGM and 51% of Brait’s ordinary shares entitled to vote at the EGM will be required
to pass the extraordinary resolutions required to implement the Equity Capital Raise.
In addition to undertakings from Titan (ZAR750m) and Ethos (ZAR1,000m) to take up rights mentioned
above, Brait has secured irrevocable undertakings from major institutional shareholders (ZAR1,378m)
to follow their rights pursuant to the Rights Offer, subject to certain exceptions for compliance with
investment mandates. Brait has also secured underwriting commitments of ZAR2,122m under an
agreement (the “Underwriting Agreement”) from a combination of Titan (ZAR250m), Ethos
(ZAR350m) and RMB (ZAR1,522m) (together the “Underwriters”) resulting in a fully committed and
underwritten Rights Offer.
The Rights Offer is conditional upon:
- the Board having validly approved all matters necessary or required for the completion of the Rights
Offer;
- Brait convening and holding the EGM to secure all the necessary approvals to pass all shareholder
resolutions required to implement the Equity Capital Raise and issue of shares to satisfy conversion
rights in relation to the Bonds;
- the preparation and submission of an offering document and/or such other documents (including
but not limited to public notices) in each case as may be required by the LuxSE and/or JSE; and
- receipt of any required regulatory approvals, including, but not limited to, the approvals of the LuxSE
and the JSE; and the Underwriting Agreement becoming unconditional in accordance with its terms.
The Underwriting Agreement is conditional on, inter alia:
- the conclusion of definitive financing arrangements with RMB and Standard Bank as BML RCF
funders to Brait, on terms and conditions consistent with an agreed term sheet; and
- since the date of the Underwriting Agreement and on or prior to 4.30 p.m. on the day prior to the
finalisation date, there shall not have occurred or been disclosed any force majeure or material
market disruption events that, in the good faith judgement of the Underwriters (acting together),
and after notification to and, to the extent practicable, consultation with the Company, would make
the Rights Offer and/or the underwriting envisaged in terms of the underwriting agreement
impracticable or inadvisable, or would materially prejudice trading of Brait ordinary shares in the
secondary market.
The conditions in the Underwriting Agreement may be waived in the absolute discretion of the
Underwriters.
4 Details of the new Brait strategy
The existing strategy of Brait 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 while 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 that will focus on maximising value through the
realisation of its existing assets in the portfolio over the next five years and returning capital to
shareholders. The Board, Titan and Ethos have committed to implement the new strategy and believe
that the Recapitalisation will provide the Company with sufficient flexibility to manage its portfolio of
investments and execute the new strategy in an optimal manner.
Post the Recapitalisation, a new Board is intended to be constituted and proposed to shareholders for
approval. Brait will additionally re-evaluate the costs and efficiencies of the overall group structure.
5 The new advisor contract
The Board has selected Ethos as a new strategic equity partner and EPE as the investment advisor to
Brait. EPE has a 35-year history of generating realised returns for investors and will bring a different
perspective to the Brait portfolio, leveraging its value-add expertise, execution capability and exit track
record to execute the Company’s new strategy.
The Board will enter into a new advisory agreement with EPE, which will incorporate the following key
principles:
- The agreement is envisaged to have an initial three-year tenor (effective from the completion of the
Rights Offer), with an annual renewal thereafter;
- The advisory team responsible for advising the Board will consist of Ethos executives and certain
members of the current Corporate Advisors to ensure continuity;
- EPE will be responsible and accountable for the duties currently performed by the Corporate
Advisors;
- The new investment advisory agreement entered into with EPE will be at an initial reduced cost of
ZAR100m p.a. with annual inflationary linked increases. In addition, the Board and EPE have
undertaken to, each year, assess the appropriateness of the annual cost in the context of the
resources required to implement the strategic business plans for that year; and
- A new incentive structure will be developed to align the interests of EPE and Brait shareholders in
terms of value creation. This will be proposed to Brait shareholders for their consideration and
approval.
Brait and its Corporate Advisors have agreed to terminate the existing investment advisory agreement
by mutual agreement, with effect from the completion of the Rights Offer. The Corporate Advisors will
continue in their role of providing the investment advisory services to Brait until that date.
The Board, with the assistance of EPE, will focus on strategies for the portfolio companies to realise
value from the portfolio over the next five years and return capital to shareholders.
6 Cancellation of the Brait Treasury Shares
The Brait Treasury Shares comprise 54,091,259 Brait ordinary shares, of which 36,616,189 are held by
BML and 17,475,070 are held by Maitland Malta Limited as trustee of the Brait Investment Trust. The
Brait Treasury Shares will not be entitled to participate in the Rights Offer. The Company proposes to
reduce the issued share capital of Brait by cancelling the Brait Treasury Shares for no consideration in
accordance with Maltese law. As such, the Company will seek shareholder approval at the EGM to
cancel the Brait Treasury Shares. If approved, the relevant resolution will be published and three months
following publication, the Brait Treasury Shares will be cancelled.
7 High level indicative timetable
The Equity Capital Raise is expected to commence in late January 2020 and be concluded in
February 2020. A detailed timetable will be included in the circular to shareholders and notice of EGM.
8 Withdrawal of cautionary announcement
The cautionary announcement released by Brait on SENS and published on the website of the LuxSE
on 23 September 2019, and updated on 21 November 2019, is hereby withdrawn.
The information contained within this announcement is inside information as stipulated under the Market
Abuse Regulation (EU) No. 596/2014 and the South African Financial Markets Act, 2012. Upon the
publication of this announcement this inside information is now considered to be in the public domain.
The person responsible for this announcement on behalf of Brait is PJ Moleketi, Non-Executive
Chairman of the Board.
San Gwann, Malta
27 November 2019
For further information please contact:
Enquiries:
invest@brait.com
Brait´s primary listing is on the Euro MTF market of the Luxembourg Stock Exchange and its secondary
listing is on the exchange operated by the JSE Limited.
Financial advisor and Sponsor to Brait:
Rand Merchant Bank, a division of FirstRand Bank Limited
International Legal advisor to Brait:
Linklaters LLP
South African Legal advisor to Brait:
DLA Piper Advisory Services Proprietary Limited
Important Notice and Disclaimer
The release, publication or distribution of this announcement in jurisdictions other than South Africa may
be restricted by law and therefore persons into whose possession this announcement comes should inform
themselves about, and observe, any applicable restrictions or requirements. Any failure to comply with
such restrictions may constitute a violation of the securities laws of any such jurisdiction. To the fullest
extent permitted by applicable law, Brait disclaims any responsibility or liability for the violation of such
requirements by any person.
This announcement is for information purposes only and is not intended to and does not constitute, or form
part of, any offer or invitation to purchase, subscribe for or otherwise acquire or dispose of, or any
solicitation to purchase or subscribe for or otherwise acquire or dispose of, any securities in any jurisdiction.
Persons needing advice should consult an independent financial adviser. The information contained in this
announcement is not for release, publication or distribution to persons in any jurisdiction where to do so
might constitute a violation of local securities laws or regulations. The information in this announcement
does not purport to be full or complete and is subject to change without notice.
Neither this announcement nor the Rights Offer constitutes an ‘‘offer to the public’’ in South Africa in terms
of the South African Companies Act No. 71 of 2008, as amended.
The securities referred to herein have not been and will not be registered under the U.S. Securities Act of
1933, as amended (the "Securities Act"), or under the securities legislation of any state or other jurisdiction
of the United States or under the applicable securities laws of Australia, Canada or Japan. The securities
referred to herein may not be offered or sold in the United States except pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of the Securities Act and in compliance with
any applicable securities laws of any state or other jurisdiction of the United States. There has been and
will be no public offering of the securities referred to herein in the United States.
This announcement is only being distributed to and is only directed at: (i) persons who are outside the
United Kingdom; or (ii) investment professionals falling within Article 19(5) of the Financial Services and
Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order"); or (iii) high net worth
entities falling within Article 49(2)(a) to (d) of the Order; or (iv) persons to whom it may otherwise lawfully
be communicated (all such persons together being referred to as "Relevant Persons"). The rights offer
shares are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise
acquire such rights offer shares will be engaged in only with, Relevant Persons. Any person who is not a
Relevant Person should not act or rely on this announcement or any of its contents.
In any member state of the European Economic Area (other than the United Kingdom) that has
implemented Regulation (EU) 2017/1129 (the "Prospectus Regulation"), this announcement is only
addressed to and is only directed at qualified investors in that member state within the meaning of the
Prospectus Regulation.
This announcement contains forward-looking statements that are based on current expectations or beliefs,
as well as assumptions about future events. Forward-looking statements often use words such as such as
"target", "believe", "expect", "may", "estimate", "plan", "will", "would", "could" and any other words and
terms of similar meaning or the negative thereof. Undue reliance should not be placed on any such
statements because they speak only as at the date of this announcement and, by their very nature, they
are subject to known and unknown risks and uncertainties and can be affected by other factors that could
cause actual results, and Brait's plans and objectives, to differ materially from those expressed or implied
in the forward-looking statements. Forward-looking statements speak only as at the date of this
announcement, and Brait expressly disclaims any obligations or undertaking to release any update of, or
revisions to, any forward-looking statements in this announcement.
The information in this announcement may not be forwarded or distributed to any other person and may
not be reproduced in any manner whatsoever. Any forwarding, distribution, reproduction, or disclosure of
this information in whole or in part is unauthorised. Failure to comply with this directive may result in a
violation of the Securities Act or the applicable laws of other jurisdictions.
Date: 27-11-2019 08:30:00
Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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