Wiese the key to any Shoprite-Steinhoff merger
A MERGER between Steinhoff and Shoprite would create an emerging-market retail giant with a presence in more than 40 countries, which could become a significant global competitor.
Walmart, the world’s largest retailer, has more than 11 500 stores globally, while a combined Shoprite and Steinhoff would have 9 211 stores in Africa, Europe, the UK, US and Australasia.
But the much-talked-about deal is still just that — speculation.
Outgoing Shoprite CEO Whitey Basson told Business Times this week he had not calculated the valuations on the rumoured acquisition. “[Christo] Wiese is the controlling shareholder, so he may have done the sums on it to see how it will affect him.
“I’m not the major shareholder of Steinhoff, in fact I’m a small shareholder in Steinhoff and a reasonable shareholder in Shoprite, but the elements will have to tell you if there’s a merger,” said Basson.
There has been speculation about the acquisition of Shoprite by integrated retailer Steinhoff since about 2006, but the deal may soon become a reality with Basson’s retirement.
The announcement of his departure from the biggest grocer in Africa saw Shoprite’s share price gain about 4.19% to R199.90 at the close on Monday, the most it has risen in two months.
An Investec report cited in the Financial Mail said Wiese controlled more than 50% of Shoprite’s voting rights and he could use this to push through a deal before April, when his voting rights drop below 50%.
Wiese has a 16% stake in Shoprite through ordinary shares and an additional 291.8 million deferred shares held through Thibault Financial Services, which carry 35% of Shoprite’s total voting rights.
Wiese also has an 18% stake in Steinhoff.
It is not clear what strategy a combined group would follow, but it would be a sizeable business.
Alec Abraham, a senior equity analyst at Sasfin Wealth, said a merged entity would not be as significant as Walmart. “They [Walmart] have got their foot in Africa via Massmart. It’s not quite in the same space as Shoprite, so I don’t think it’s necessarily a major threat to them in any way.
“It depends, however, if a Steinhoff and Shoprite combination would want to develop into different types of categories and become a general merchandise retailer. I don’t believe that is the case,” said Abraham.
If Steinhoff does make an offer for Shoprite, it won’t be the first time the grocery retailer has been a target. In 2007, Brait Private Equity offered to buy Shoprite for R26 a share, or an initial offer of R14.2-billion, but shareholders rejected the deal after failing to agree on a revised offer. Since 2007, both Shoprite and Steinhoff’s share prices have risen over 300%.
Four years later, Wiese was appointed a nonexecutive director of Brait. Steinhoff bought Pepkor from Brait last year, and more recently bought Tekkie Town. In September this year, Wiese invested a further R24.3 billion in Steinhoff to help finance its acquisition spree in Europe and North America. Steinhoff had already bought furniture businesses Mattress Land in the US and Fantastic Holdings in Australia. It also bought UK discount retailer Poundland.
Victor Dima, an analyst at Arqaam Capital, said a Steinhoff-Shoprite merger would only happen if it made sense for the shareholders.
Dima said Shoprite’s share price had risen because “they posted very strong and unexpectedly good numbers, especially when you look at African growth, and more so growth in Africa in constant currencies, [which] is over 50%”.
“So the market would be reacting on this news primarily, and with the announcement of Whitey leaving and the replacement, the market was not disappointed.”
Wiese could not be reached for comment this week, but in October he dismissed rumours that Steinhoff was poised to buy Shoprite, saying discussions had been going on for a number of years.
But it may not only be Steinhoff that is looking at Shoprite.
“There may be other companies, it’s not just Steinhoff in the world, maybe Anglo American,” Basson joked. “If we could merge then I can get a plane for cheap.”
Shoprite’s share price declined 2.72% to R186.05 by the close on Friday.