JSE-listed investment holding company Ethos Capital is unbundling its stake in Brait plc while Peter Hayward-Butt, the company’s co-CEO who also heads up Brait, has resigned from the posts and will be replaced by Anthonie de Beer at the beginning of next month.

Ethos’s interest in Brait was held through TRG Africa Direct Investment Fund and TRG Africa Fund VII. The shares in Brait are now being offloaded to Ethos Capital shareholders.

Brait plc is an investment holding company whose ordinary shares are primary listed on the Euro MTF market of the Luxembourg Stock Exchange, with its secondary listing on the exchange operated by the JSE.

As part of the Brait unbundling, Ethos yesterday said it had received an in-principle approval from Rand Merchant Bank (RMB) to “amend the company’s existing covenants and to extend its current debt facilities” until February 2028.

Proceeds from the repayment of the Brait exchangeable bond held indirectly by Ethos Capital will be used to reduce the current RMB facility on completion of the Brait recapitalisation transaction.

Saltlight Capital Management portfolio manager David Eborall yesterday said “Ethos Capital is spinning out its Brait shares, leaving shareholders to fund the rights issue or be significantly diluted” if they opt otherwise.

Other market watchers said Ethos Capital and Brait were 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” market positions.

However, Piet Viljoen, fund manager at MW Investments, queried whether this arrangement was allowing Ethos Capital non-executive directors “to walk away from their debt” of up to R100 million plus interest that was “incurred” under the Black Hawk structure.

Ethos said that in order to facilitate the Brait unbundling, Black Hawk – which is owned by non-executive directors of Ethos Capital – had waived its rights to receive share of the Brait ordinary shares in terms of the Brait unbundling scheme.

The Black Hawk shareholders had also agreed to sell their Black Hawk shares to Ethos Capital for nil consideration.

On implementation, the transaction will constitute “an indirect acquisition of Black Hawk’s Ethos Capital shares and the associated debt” but will “have no impact” on the group’s net asset value per share.

Ethos Capital said that its net asset value per share, including its investment in Brait, had increased by 1.8% in the quarter to March 31, 2024, rising from R7.31 to R7.44 per share.

It attributed this to Ethos Capital’s unlisted portfolio that achieved a return of R0.55 per share over the quarter, and a decrease of R0.22 per share in the listed portfolio accounted for by a 25% reduction in the Brait ordinary share price over the same period.

Shares in Ethos Capital sagged 0.48% in afternoon trade on the JSE to R4.18, although the company’s stock was nearly 10% firmer in the past 30 days.

Shares in Brait Capital tumbled by more than 7% on the JSE yesterday to trade R0.88 in afternoon trade session.

“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 Tuesday, 9 July 2024, will not participate in the Brait unbundling and will not receive the Brait ordinary shares,” said the company.

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