Brimstone Investments, the largest shareholder of food producer Sea Harvest, will sell its 3.4% stake in SA’s second-biggest hospital operator, Life Healthcare, as it cashes in on returns where it nearly sextupled its money.
The Cape-based investment holding company said on Monday that last week its shareholders voted in favour of the disposal of its shareholding in Life Healthcare, the proceeds of which would be used to settle about R1.35bn in debt.
Brimstone will sell its 47-million Life shares in six tranches, which will be completed by the end of March 2021.
By the end of the sale of the shares, Brimstone will have halved its debt from R4bn to R2bn.
Brimstone originally invested in Life Healthcare in June 2005 when it was an unlisted entity, spending about R225m or the equivalent of R3 a share, according to Brimstone CEO Mustaq Brey.
“We are firmly in the money and want to reward our shareholders. Life Healthcare has been a fantastic investment which we have held for years,” he said.
Its main investments are more than R2bn or about 54% of fishing group Sea Harvest and a R2bn or 25% investment in fishing company Oceana.
Brey said Brimstone was selling down debt given the weak and uncertain state of SA’s economy.
Earlier in 2020 it sold parts of it investments in Equites Property Fund and Phuthuma Nathi, Multichoice’s broad-based black economic empowerment share scheme. This enabled the company to settle debt of about R593m.
“Given the uncertainty in the economy, plagued by extremely low growth, and possibly a delayed recovery from Covid, we believe that it is prudent and responsible to reduce debt,” Brey said.
“We are in a cycle where many investment holding companies such as Brimstone are trading at deeper discounts to intrinsic net asset value. We aim to restore and create shareholder value and we believe that de-gearing is one way of narrowing the discount and ultimately restoring value to shareholders,” he said.
Investments in Sea Harvest and Oceana formed the anchors of Brimstone’s investment portfolio. These two investments alone have a market value in excess of R4.1bn.
Brimstone’s share price was unchanged at R5.50 on Monday. The stock is down 23.07% since the start of 2020.