The Iceland supermarket chain, gym group Virgin Active and a big stake in fashion chain New Look, are to be put up for sale by their South African owner as it attempts to cut its debts.
The controlling stakes in Iceland and the Virgin gym business and the slice of New Look are owned by Brait, an investment vehicle where the largest shareholder is retail entrepreneur Christo Wiese. Brait has to repay a £350m bond next year and needs to raise cash to do so.
In a statement to the South African stock exchange, Brait said it planned to offload all its assets if the rescue plan was approved by shareholders in January. It said it was adopting “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.” Brait will also raise cash by issuing shares to South African private equity investor Ethos.
The three investments were part of a grand plan by Wiese to snap up multiple UK retailers. In 2015 he said he had £1bn to spend and was linked to numerous store chains. However, since then his investments have turned sour amid problems on the UK high street and an accounting scandal at one of his other companies, Steinhoff, which owns Poundland.
Brait owns 63% of Iceland. It first bought a 12% stake in Iceland in 2012, as part of an management buy out led by the retailer’s founder Malcolm Walker, and then bought out other shareholders including Lord Kirkham, the founder of furniture chain DFS. Brait rates its investment in the 860 store business, which also includes Food Warehouse, at Rand 2.7bn (£141m).
Walker, who owns the remaining 37% of the company together with his son Richard and other members of the management team, said he had yet to meet with Brait’s likely new investor, Ethos, but was sure the controlling stake would not be sold without his agreement. He insisted he was “relaxed about the whole thing”.
The grocer posted sales up 2.4% in the six months to 13 September. However the chain slumped to a pretax loss of £7m, compared to a £3m profit in the same period a year before. Its net debt widened by £39m to £736m.
Virgin Active is Brait’s most valuable investment, accounting for more than half the value of its assets. A half yearly statement released this week values Brait’s 72% stake in the company at Rand 16.7bn (£880m). The company has seen underlying profits and revenues rise in recent months including an 11.5% jump in UK profits in the nine months to the end of September.
Virgin Active declined to comment on a potential sale.
Brait had already lost control of the struggling New Look, which has 500 stores, earlier this year after it was forced to refinance the fashion chain handing a majority stake to bondholders.
Brait bought New Look for £780m in 2015. He now owns 18.5% of the chain, but that stake is valued at zero.
The company closed 85 stores last year through an insolvency procedure after an annual loss of nearly £235m, which its chairman blamed on its product range becoming too young and edgy and on an ill-starred international venture.