‘Nothing is impossible’ says Wiese, as the Steinhoff saga plays out
● For a time, Steinhoff International seemed the chosen vehicle for billionaire investor Christo Wiese to consolidate all his retail investments in the country.
The developments over the past three months have basically put paid to his plans and the last surviving pillar of his investments, Shoprite, may after all prove to be the vehicle.
With Steinhoff’s fall still unfolding and its long-term prospects unknown, some analysts are talking of the possibility of Wiese’s most prized asset, Pepkor, eventually finding its home in the portfolio of Africa’s biggest grocer, Shoprite.
Steinhoff Africa Retail (STAR), which is majority owned by Steinhoff, owns Pepkor, but it is caught up in the web of scandals surrounding its parent company.
Graeme Korner, a fund manager at Korner Perspective, said: “At the moment it’s a case that all options are on the table.
“So previously, where it was a case of STAR acquiring a majority stake in Shoprite, they [STAR] may now paradoxically be the target.”
Korner added that a “a merger of equals makes a lot of sense. What you have is a geographic footprint that is better than that of Shoprite, and if you take on a franchise store basis, you can take a Pep or an Ackermans in there.”
He said Shoprite could take some of STAR’s brands into Shoprite stores as this might be a better utilisation of space.
“That absolutely makes sense, so I would not be surprised if Shoprite says that the shoe is on the other foot now: we would be interested in the acquisition of STAR where we issue shares in exchange for STAR shares,” he said.
The Pepkor brands include Pep, Ackermans and Best for Less. The group was the top performer of STAR group’s latest results.
In 2015, when Steinhoff bought Pepkor, it was prepared to accept a historic 37.4 price:equity valuation that it acquired for R62.8-billion from Wiese’s listed holding company, Brait. According to Bloomberg data Shoprite’s market capitalisation is currently worth R160-billion.
“It’s become a bit bizarre and even though they are some great businesses and the 130 000 staff need to be protected, because it can’t continue as it is some stuff is going to have to go,” Korner said.
Speaking at the results presentation this week, Wiese said that although there had not been an official conversation on the possible sale of Pep, “nothing is impossible”.
Korner said Steinhoff had made peace with the fact that it had to sell some of its prized assets. “Suddenly, STAR is a great asset that has great value and it would be a real tragedy for them to lose it.”
While analysts may toy with the idea, Pieter Engelbrecht, Shoprite Group CEO, said he did not see the grocer acquiring Pep.
“We are trying to focus even more on food retailing than another completely different line of business — we don’t want to become a conglomerate of multiple businesses. It’s not ideal,” he added. “The food services business marries it much better than a clothing business. Some of the things that we discussed with the STAR association were more of a sharing of other services, like financial services, for example.”