Johannesburg – Listed retail giants Shoprite and
Steinhoff say they continue to have exclusive talks about a possible merger.
The companies on Tuesday said they “remain engaged in
exclusive on-going negotiations regarding the potential sale of Steinhoff’s
Africa retail assets to Shoprite”.
This follows an announcement in December that the
companies were planning on creating an entity to be called Retail Africa.
Retail Africa is expected to be the continent’s largest
retailer with an annual turnover of R200 billion, employing 186 000 people.
Shoprite will issue new ordinary shares to Steinhoff that will give what is one
of the world’s biggest furniture retailers a significant stake in Shoprite.
The deal will result in Shoprite acquiring Steinhoff’s
clothing chains, which include Pep, Ackermans, Shoe City and Tekkie Town in
exchange for shares. Shoprite will also buy the furniture and appliance
retailers that Steinhoff owns via JD Group. These include Russells, Bradlows,
Rochester, Incredible Connection, Hi-fi Corporation and Sleepmasters.
The enlarged business might ultimately come under
Steinhoff’s control through a share swop, the companies said in December. 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
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The companies noted the merger was supported by the two
largest shareholders of both companies, the PIC and Titan Premier Investments
Proprietary, a company controlled by a family trust of Christo Wiese.
Wiese, South Africa’s third-richest person with a net
worth of $6.3 billion (R85.80 billion), is the biggest shareholder in both
Shoprite and Steinhoff. He holds 16 percent of Shoprite and 18 percent of
Steinhoff. If the companies finally merge it would pull together his retail
assets under one roof following Steinhoff’s acquisition in 2014 for nearly $6
billion of Wiese’s budget clothing retailer Pepkor, creating a global giant
worth around R400 billion.
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Shoprite in talks
Wiese had said the merger between the companies had been
on the table since 2006. However, the rumours got louder last September.
The companies said the value for Steinhoff Africa Retail
would be negotiated, taking into account the best interests of both Steinhoff
and Shoprite shareholders.
The proposed transaction is expected to position the
combined businesses of Retail Africa as the leading multi-format discount
retailer on the African continent.
The announcement comes just one month after Shoprite’s
founder and long-time chief executive, Whitey Basson, said he would retire,
leading Wiese to say the retailer was at a “crossroads”.
Retail Africa, locally bred, will have the required size
and scale to compete with any other international retailer.
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Shoprite and Steinhoff, which has increasingly been expanding
in Europe, said shareholders should be cautious as the deal, if concluded,
could have a material effect on the share price.
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