Brait to spinoff $1.3b Steinhoff stake – hits acquisition trail

Investing 101, buy cheap and sell expensive – simple – for some as Brait looks to offload its $1.3 billion stake in Steinhoff. Steinhoff closed the day (June 18) at R72.75 on the JSE, this against the transaction price of R57, when Brait sold Pepkor to Steinhoff, would see a return of 27.6 percent since late November. Not many investors would turn there noses up at that and with Steinhoff trading 7 percent off its 52 week high of R78.51 (April 27), and a Frankfurt listing around the corner, some may say it is it the right time to say goodbye. – Stuart Lowman

By Janice Kew

Brait 1 year 18 June
Brait 1 year graph – 18 June 2015

(Bloomberg) – Investment company Brait SE plans to sell its 6 percent stake in furniture retailer Steinhoff International Holdings Ltd. within 12 to 18 months, its South Africa Chief Executive Officer John Gnodde said.

“Brait’s strategy is to hold majority controlling positions in privately owned businesses, so what we offer the market is access to market leading, sizable private companies,” Gnodde said by phone on Thursday. “So off the back of that, holding 6 percent of a public company doesn’t really fit in with that strategy.”

The shareholding, worth about R15.6 billion ($1.3 billion) at Johannesburg-based Steinhoff’s current share price, was acquired as part of Brait’s sale of its stake in clothing retailer Pepkor Holdings Pty Ltd. to Steinhoff late last year – part of a $5.7 billion transaction.

Brait agreed to pay 682 million pounds ($1.09 billion) for 80 percent of British health-club provider Virgin Active in April and 780 million pounds for 90 percent of U.K. women’s clothing retailer New Look last month. The company was seeking as many as three acquisitions in the European and South African food and consumer-goods market following the R26.4 billion windfall it received from the Pepkor sale, Gnodde said in November.

‘Good Business’

Steinhoff 1 year 18 June 2015
Steinhoff 1 year graph – 18 June 2015

Steinhoff, South Africa’s biggest furniture company with plans to list in Frankfurt this year, is “a good business, doing the right things, so there is no rush,” Gnodde said on Thursday. The stake will be sold in tranches in a “responsible and proper manner” as Brait looks for the highest returns, he said.

While the proceeds from a Steinhoff stake sale have yet to be earmarked for a specific acquisition, Brait sees further opportunities in the consumer industry, Gnodde said. The company is seeking “strong brands with a strong market position that shows higher growth and very high cash conversion,” he said.

Brait shares gained 1.8 percent to 113 rand as of 1:22 p.m. in Johannesburg, extending the two-day increase to 4.1 percent. Steinhoff advanced 0.8 percent to 72.60 rand, valuing the company at R260 billion.

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