Brait sells their Steinhoff stake and ups Iceland stake

Brait announced on Friday that they had sold their stake in Steinhoff and that they had upped their stake in Iceland Foods. That was pretty quick, I actually lost 50 bucks to Michael, I would have thought they (Brait) would have held the Steinhoff stake into a Frankfurt listing and beyond into next year, just to get a PE unwind and lift quickly. Just a refresher, for their Pepkor stake, the 37 percent interest that Brait held, they got 15 billion Rand in cash and 200 million shares in Steinhoff. The shares have been sold for around 16 billion Dollars. About 80 Rand a share. They are going to use the funds to settle their 14.2 billion Rand obligations.

They have then turned around and bought another 38 percent (to take their full stake to 57 percent) in Iceland Foods for 172 million Pounds, or nearly 3.6 billion Rand. Not huge, around 5 percent of their current market cap. And they will fund the acquisition with the recently announced convertible bond issuance, remember that -> Brait convertible bond. And they will still have around half of the money left. So is it fair to say that Brait may have sold a quality asset and bought more of a less exciting business, they certainly have been great allocators of capital. And of course, when invested in a Investment Holding vehicle, you want access to the smart folks who can see the opportunities and have a tolerance for owning unlisted entities (and by extension less liquidity). As Warren Buffett said, you should be prepared to own a company on the basis that the equities market closed tomorrow for five years.

This is a positive for Steinhoff, the overhang of a big shareholder has been removed, 200 million shares have no doubt been placed in the hands of longer dated institutional investors, you would think. The shares of Steinhoff rallied nearly one and a half percent, Brait shares fell over a percent. We want gearing, I hear you shout. They are just being prudent after a very short and sharp period of major asset gathering.