Activist investor Mergence has joined forces with billionaire Christo Wiese’s Titan to repair Brait’s balance sheet and unlock value at the investment company, which owns gym group, Virgin Active, see full statement below:

Over the past few months, Mergence and Principle Capital jointly approached Titan as the largest shareholder of Brait with a proposal to unlock value at the company and support the repair of its balance sheet. 

While this initial proposal was not acceptable to Titan, further discussions between Titan and Mergence have resulted in a transaction as announced by Brait on the JSE SENS service.

According to the SENS statement, Titan has disposed of 27 million shares to Mergence at R15.40 apiece together with a call spread, which provides Titan with upside participation. Investopedia defines a call spread as an “options trading strategy designed to benefit from a stock’s limited increase in price. The strategy uses two call options to create a range consisting of a lower strike price and an upper strike price”.

In addition to this transaction, Mergence has entered into an agreement with Titan to co-operate in supporting the repair of Brait’s balance sheet and the unlock of value at the company.  As part of this agreement Mergence will propose a nominee to the board of Brait; and along with Titan support a strategy to strengthen the balance sheet of Brait, amend the current advisory contract, reduce costs payable by the company and pursue the sale of assets to maximise value for shareholders.

Mergence and Principle Capital continue to look for other opportunities where they may work together to enhance shareholder value through an active approach to investing on the JSE.

*Story corrected to state that only Mergence is part of the deal with Titan not Principle Capital