Is Christo Wiese losing Midas touch?

Investments have taken battering over past year

Market lore has previously held that punters could do well by simply following the investment trail of serial risk taker Christo Wiese — who built enormous long-term wealth with retail firms Pepkor and Shoprite.

Up until fairly recently, that might have been a rewarding strategy. But of late the retail tycoon, who famously operates out of an office in unfashionable Parow East in Cape Town, has shown the symptoms of the dreaded “reverse Midas touch”.

Anyone following Wiese’s investment strategy at the start of this year would have incurred third-degree wallet burns.

Pretty much everything Wiese has invested in — from property companies to mining ventures and industrial counters to retail — has taken a battering over the last year or so.

The dramatic collapse in consumer conglomerate Steinhoff International, however, is a blow that Wiese will certainly battle to fully recover from in the years ahead.

Over the last few years it seemed Wiese was determined to “externalise” a chunk of his investment holdings through Steinhoff. This was done by rolling up a number of his investments into Steinhoff, which had transformed into a global retail champion with a primary listing on the Frankfurt Stock Exchange.

The first clue came in late 2011 when Wiese — to the surprise of many — swopped his 9% stake in Stellenbosch investment company PSG Group for shares in Steinhoff.

In late 2014 Wiese — via his Titan nominee company — sold his 52.47% stake in low-cost fashion retailing conglomerate Pepkor to Steinhoff in exchange for shares. The deal — in conjunction with Wiese-aligned investment company Brait also selling its stake in Pepkor — made Wiese the largest shareholder in the enlarged Steinhoff.

The staggered buy-in — and subsequent share purchases — make it difficult to quantify Wiese’s paper losses at Steinhoff. But it seems he may be down by more than R45-billion.

While the Steinhoff implosion is the main wrecking ball to Wiese’s portfolio, it is worth examining the poor run in other investment holdings — outside the stalwart shareholding in supermarket giant Shoprite.

Wiese’s other big position lies in investment company Brait, which holds interests in UK-based grocery business Iceland, UK-based fashion retailer First Look, health and fitness group Virgin Active and consumer brands conglomerate Premier Group.

The push into the UK fashion market via First Look has been extremely costly — and perhaps symptomatic of a desire to hedge as much (and as quickly) as possible against local economic and political risks.

At the time of writing Brait, which recently wrote down its investment in First Look to zero, was trundling along at a 12-month low of R39.

Brait’s last annual report showed Wiese holding around 18 million shares that at the end of March this year were worth more than R14-billion.

At Friday’s price Wiese’s shareholding was down by half to around R7-billion.

Wiese has always had a penchant for mining ventures, and in recent years had mixed fortunes in the form of fluorspar miner Sallies (a flop) and Neil Froneman’s GoldOne International (a glittering success).

More recent tilts have been underwhelming, most notably Brian Gilbertson’s Pallinghurst Resources, tired old diamond miner Trans Hex and a lowkey foray into a Toronto-listed marine diamond mining company Afri-Can Marine Minerals Corporation. These were relatively small plays for Wiese, but the value erosion has been serious.

Even dependable industrial investment Invicta Holdings, where Wiese is the biggest shareholder, has been disappointing, losing close to 40% of its value over 12 months. There have been efforts to unlock value, including the sale of subsidiary Building Supply Group (BSG) to Steinhoff subsidiary Steinbuild for R678-million in February this year.

Stellar Capital Partners — an investment in which Wiese is a large shareholder — has also slumped to new lows with its large investment in listed Torre Industrial losing value rapidly.

Wiese seems not to be enjoying any luck with property plays either.

Tradehold, which owns properties in the UK and South Africa (as well as financial services interests), is trading close to 12-month lows in spite of proposals to restructure the company to unlock value.

The value of Wiese’s significant minority stake in Texton — which also holds a UK and South African property portfolio — is also much depleted. So can Wiese get up off the canvas? History will show that Wiese is wiling to take a loss and move on to other more promising investments. Famously he walked away from a hapless Sallies and promptly more than made up for those losses with GoldOne International.

At this point, the salvaging of Wiese’s fortunes rests on Steinhoff soon clearing the air around allega- tions of irregular business activities.

If there is a prolonged impasse, then Wiese’s actions may well be determined by his level of gearing, which at this point is not known.

If there is breathing space there must be an opportunity to consolidate some interests in a bid to shore up value.

If there’s not, then there’s an array of investments that could be put on the block in the months ahead.

Wiese seems not to be enjoying any luck with property plays either