Steinhoff, Shoprite in merger talks

JOHANNESBURG. – Steinhoff International Holdings and Shoprite Holdings said they are in talks to combine their African retail businesses, creating the continent’s biggest merchant in a deal spearheaded by billionaire Christo Wiese.Under the two-pronged proposal, Shoprite would acquire Steinhoff’s African retail operations, the companies said in a statement yesterday. Shoprite would issue new shares to Steinhoff, giving the latter a “significant equity interest” in an enlarged Shoprite, they said.

The enlarged business may ultimately come under Steinhoff’s control through a share swap, the companies said.

A union with Shoprite would continue a dealmaking spree that’s taken Steinhoff across the UK, Europe and the US Talks between the companies were initiated and facilitated by their two biggest shareholders – Wiese and South Africa’s state-owned Public Investment Corporation, which manages state pensions, the retailers said.

Wiese, South Africa’s third-richest person with a net worth of $6,3 billion, owns about 16 percent of Shoprite and 18 percent of Steinhoff.

“This is Christo Wiese looking to organise assets, and having Shoprite and Steinhoff assets in one entity in Africa is plus,” said Sasha Naryshkine, an analyst at Johannesburg-based money manager Vestact.

“This will be one of the biggest retail companies in Africa, if not the biggest, with fingers in lots of pies.”

The combined businesses would be called Retail Africa, and would bring together Steinhoff-owned chains such as Pep and Ackermans with Shoprite and Checkers supermarkets.

The enlarged business would have annual revenue of about R200 billion ($14,6 billion) and earnings before interest, tax, depreciation and amortisation of about R15 billion.

Steinhoff, whose recent takeovers include UK discount chain Poundland and US retailer Mattress Firm Holding Corporation, has also agreed in principle to acquire the stakes in Shoprite held by PIC and a company controlled by Wiese’s family trust. That would be done through a share exchange, the companies said.

The announcement comes just one month after Shoprite’s founder and longtime CEO, Whitey Basson, said he would retire, leading Wiese to say the retailer was at a “crossroads.”

Investors gave the planned union a cool reception.

Steinhoff shares slid as much as 6,9 percent in Frankfurt, where the company moved its main listing last year.

Shoprite fell as much as 3,8 percent in Johannesburg.

“This deal has been rumoured for a while though and the speculation has always been that Christo Wiese wants to move the majority of his wealth to a European entry point,” Bradley Preston, a fund manager at Cape Town-based Mergence Asset Managers, said. – Moneyweb.