Why a Shophoff or a Steinrite could make sense
AT FIRST GLANCE, investors will probably wonder what Shoprite would want to do with Steinhoff, or the other way around. But there would be many opportunities. Shoprite is slowly in the process of entering furniture retailing with, among others, its OK Furniture brand and its own House and Home. This division, which already accounts for 13% of the group’s turnover, could soar after a merger.
The larger Shoprite/Steinhoff would offer a better balance than the two are achieving separately. Steinhoff’s more than 50% exposure to foreign income is too high. Shoprite, on the other hand, is too small outside Africa. Combined it would be an income of between 30% and 40%, a large portion of which would be from emerging markets. Once again, that’s a figure that would suit investors.
Smaller synergies, like Steinhoff’s Unitrans, which has already been successful with logistics in Africa and in emerging markets in Europe, and Shoprite’s need for many tons of goods to be transported daily all show that one large one makes sense.
If you look at the two annual reports, you see many other similar opportunities. Steinhoff specialises in expanding and strengthening the acquisition chain. Whitey Basson, on the other hand, knows how to sell.