Wiese shrugs off his thwarted Shoprite bid
| Retail magnate tells Adele Shevel how he worked his way up to become South Africa’s wealthiest man
SEVEN years after Christo Wiese, SA’s richest man, failed in a R15billion bid to buy out small shareholders and delist Shoprite from the JSE, he says he has “no regrets” over the doomed bid.
Wiese and Brait offered R25.50, then raised this to R28 a share after criticism from shareholders, to buy out minority shareholders. Shoprite’s shares now trade at R167/share, which shows Wiese and Brait would have got Shoprite for a steal.
“I’m obviously delighted that Shoprite performed so well over the last seven years,” said Wiese.
“It’s a wonderful company, and it has tremendous potential. We’ve only really just started in Africa though we were pioneers of South African retailers into Africa and have been there for 20 years.”
Had the bid succeeded, it would have followed the Pepkor deal. In 2004, Wiese and Brait bought Pepkor for R2.1-billion by buying out minorities and delisting it from the JSE.
A retail boom followed, which led to Pepkor’s value soaring. In its annual report, Brait put a value of R18.9billion on Pepkor by December, an almost tenfold rise since the buyout.
The soaring retail environment of the mid-2000s made Wiese enormously wealthy, overtaking Johann Rupert, Patrice Motsepe and the Oppenheimers to become South Africa’s richest man with a fortune north of $4.1-billion.
He is the single-largest investor in Shoprite (which operates in 16 countries in Africa) and Pepkor (11 countries in Africa, and Australia, Poland, the Czech Republic and Slovenia).
Pepkor, which targets low-income earners, plans to expand across Africa to add to its 2 800 stores in southern Africa. Wiese said Pepkor was targeting Nigeria, Angola and possibly Zimbabwe. But in South Africa, retailers are struggling.
“If the economy does not grow then it’s very difficult to grow because you just have to fight that much harder for market share,” said Wiese.
YOU wouldn’t expect to find the country’s richest man in an office in an ordinary building more brick than glass and wedged in next to a township in Cape Town’s Parow Industria.
Yet this is where Christo Wiese, retail magnate and the 382nd richest man in the world with a fortune of $4.2-billion, concocts his deals.
It’s a world away from the corporate shrines of Johannesburg’s Sandton or Cape Town’s CBD, but the sort of place where ordinary folk go about their business.
Wiese wasn’t born into grand wealth, but clawed his way to the top by building an empire spanning everything from 19c underwear to $20million pieces of Fabergé jewellery.
During the interview, Wiese drinks water but not from a bottle emblazoned with his company insignia. Paper and files swamp a boardroom table where he works — a refreshing contrast to the obsessively tidy paperless offices of his peers.
If a cluttered desk is a sign of a cluttered mind, then what is an empty desk a sign of, he asks
Wiese smiles when asked about this: if a cluttered desk is a sign of a cluttered mind, then what is an empty desk a sign of, he asks.
Now 72 years old, he loves to tell stories. This speaks of his upbringing in Upington, a town surrounded by the harsh Kalahari in the desolate Northern Cape, as well as of his training as a lawyer.
Wiese was drawn to the legal fraternity because of the dramatics of discussion — there was something about listening to arguments and logical analysis that intrigued him.
But he was also drawn to the world of commerce. If others could do it, he thought, so could he.
Being an outsider to fancy accounting theorems helped him see things from a different slant, he says.
His legal training also helped him develop financial structures.
In 1985, when the rand plunged 50% after PW Botha’s Rubicon speech, Wiese’s Pep group was staring down the barrel due to its decision to take on interest-bearing debt in dollars.
So Wiese did what no one else was doing: he bought a currency option to hedge the impact of the currency smack. It mitigated the worst of the impact, but even after the dust had settled, the Pep group had a debt-toequity ratio of more than 100%.
Wiese believed this to be simply an “accounting convention” — rather than a reflection of reality — so he had Pepkor’s assets revalued, which caused the ratio to fall dramatically.
Wiese’s trek to the very summit of the South African wealth table came during South Africa’s transition from a primarily mining-driven economy to a broader-based consumer society. Whereas the Oppenheimers and other mining magnates held this title in the formative years of local commerce, Wiese made his money not from digging but from selling things to other South Africans.
In 1965 in Upington, a group of friends including Renier van Rooyen founded Pep stores using a then considerable R125 000. Wiese, then a young 24-year-old, soon joined the company.
This fateful step ultimately led to the takeovers of Shoprite in 1979, Ackermans in 1986 and Checkers, Stuttafords and Cashbuild in 1991.
In 1986, Shoprite was spun out from the group and listed separately on the JSE, while Pepkor became the listed entity for the clothing interests.
Today, Wiese is the undisputed heavyweight in both Shoprite and Pep, chairing both. He owns a direct 52% stake in Pepkor (and more through another 33% of private equity company Brait, which also has shares in Pepkor) and 15% of Shoprite — and he controls them both through a complicated voting structure.
That might be where he made his fortune, butWiese’s tentacles extend far wider. He also holds large chunks of engineering firm Invicta, investment company Tradehold, and is the third-largest shareholder in furniture manufacturer Steinhoff.
Taken together, Wiese’s influence extends to more than R150-billion in market value for those companies, which employ 160 000 people.
During the interview, his phone rings. It’s “uncle Butch” who, apparently, is Whitey Basson, the CEO of Shoprite.
“Wat doen jy die naweek want ek will plaas toe gaan met ’n pal of twee… ?,” (‘‘What are you doing this weekend because I want to go to the farm with a pal or two?”) he asks Basson. They’re great friends, and have been since university.
The chemistry between the two is legendary. And it’s a good thing, considering how Basson has made billions for Shoprite’s investors — including Wiese.
When Walmart came sniffing around South Africa for a company to buy, Shoprite was high on the list.
So why wouldn’t Wiese sell to the Americans? He retorts: “The question is, why would I?”
“There’s not a chance that Whitey Basson would wake up one morning and see that Christo had sold Shoprite to Walmart.
“That’s just never going to happen. If such an eventuality should ever happen, it will be with the full knowledge and participation of everybody,” he says.
Sure, there might be participation and engagement, but everyone knows that Wiese calls the shots.
One of his great skills, if Basson is any indication, is his ability to pick the right jockeys for his horses.
Says Shane Watkins of All Weather Capital: “He’s very good at finding and backing the right people —– he has a real skill in doing that.” Besides Basson, Invicta’s Arnold Goldstone and Pepkor’s Pieter Erasmus are two other cases in point.
Wiese has “an above-average tolerance for risk, but he also has an above-average talent for it. He loves doing transactions, and the more complex the better. And he has the ability to understand the operational business and has the ability to understand the financial instruments that fund those businesses”, says Watkins.
This is notable praise, considering Watkins clashed with Wiese in 2006 when he underwrote an offer from Brait to buy out all the shares of Shoprite and delist it from the JSE.
The offer was pitched at R28/share, and shareholders complained that Wiese (and Brait) were trying to get Shoprite for a steal, when it was worth far more.
If you look at Shoprite now, trading at R165 a share, it seems those shareholders were right to resist.
Eight years later, Watkins says it wasn’t personal — Wiese was just being opportunistic. “He does a lot of things where he doesn’t seek or get the recognition he deserves.”
He tells, for example, how Wiese donates boxes of wine to Watkins’s child’s school fundraising.
“There are numerous examples where he’s done stuff like that. He will attend to quite trivial things to help you,” Watkins says.
This raises the inevitable question: for a man who is a dollar billionaire many times over, why is he still working?
He’s very good at finding and backing the right people — he has a real skill in doing that
Wiese says he sees it as his contribution to creating “opportunities” and spurring young people to move up the ladder.
He sees his retail empire as something of a family business. His son Jacob is involved in it, and is now working in London on the family’s property portfolio.
His youngest daughter Christina also recently joined the business as a management trainee.
“I tell my children that it’s not as if you can just up and go. When you move into those positions, you assume that responsibility, that cross.”
It may look like Wiese is keen to roll up his sleeves with the working class in Parow, but at the end of the day, he will climb into his car and drive to Clifton — perhaps the cream of South African addresses. Wiese, it turns out, loves property. He has a game farm in the Kalahari, and he owns the Lourensford wine estate.
Wine farms sound good on paper, but it seems to be an expensive vanity asset. Wiese agrees that it doesn't make sense to own a wine farm. But he says it creates employment.
And, lets face it, he can afford it.