Third time lucky for Wiese?

The tycoon is trying again to consolidate his retail interests in a deal that may prejudice Shoprite minority shareholders

Like it or not — and Christo Wiese seems not to — stories abound of the lengths to which he will go to save a few rand.

So it should be no surprise that analysts’ response to Wiese’s latest attempt to consolidate his retail interests has largely been a resigned shrug, as they await details of a deal expected to prejudice Shoprite minority shareholders.

Earlier this year, when Wiese’s second attempt to restructure his retail interests collapsed, Steinhoff shares were trading at R69 and analysts forecast that they would gain 19% within a year. Shoprite was trading at R188 and analysts tagged its shares to hit just more than R200 within the year.

Five months later, as the market tries to digest the broad-brush outline of Wiese’s third attempt to consolidate his retail interests, the Steinhoff share price is looking very soggy, while the prospect of a tie-up with Steinhoff seems to take the wind out of the Shoprite share price.

The Steinhoff share price has spent much of the past five months loitering below R70, while Shoprite went through the R200 level within days of the second tie-up being abandoned. It reached an all-time high of R212.15 in May. Remarkably, that was the day former CEO Whitey Basson exercised a put arrangement he had with the company, from which he is set to bag a cool R1.7bn.

The latest proposed deal has tentatively valued Shoprite at R215 and will result in Steinhoff buying a 22% economic interest and 50% voting interest in Shoprite from Wiese and the Public Investment Corp. Wiese will emerge as the controlling shareholder in Steinhoff, which will list its extensive African assets separately as Steinhoff African Retail (Star) ahead of the Shoprite transaction.

Retail analyst Syd Vianello says he’s looking forward to seeing the full pricing details of the transaction.

“Wiese is determined to get his shares into one entity, but at least this time minority shareholders in Shoprite can remain invested.

“At this stage it can’t be called a merger, it’s simply the creation of a much bigger organisation,” says Vianello.

Shoprite shareholders who struggle to see the benefit of being tied in with an Africa-wide furniture and clothing company may be comforted by the fact that the deal is not a merger. For many of them, Steinhoff’s growth has been too fast and acquisition-dependent to justify putting it in the driving seat of SA’S most successful grocery retail group.

Sasfin’s Alec Abraham says there are probably economies of scale from uniting the two companies, particularly in distribution.

“Pep has extensive distribution facilities in Africa and Shoprite is on the cusp of building its own distribution centre in Africa; there must be scope for sharing these facilities.”

But Abraham says there’s a strong case for keeping the two groups distinct: “They could coexist as two distinct entities.”

Wiese is determined to get his shares into one entity . . . At this stage it can’t be called a merger, it’s simply the creation of a much bigger organisation Syd Vianello