JOHANNESBURG - Christo Wiese on Tuesday offloaded R3.6 billion worth of his stake in Shoprite Holdings in a move that stunned the market and sent the company shares into a tailspin.
Wiese placed 17 million shares at R210 each in Africa’s biggest supermarket chain to institutional investors through Titan Premier Investments, an investment vehicle he owns, in order to raise cash. The sold shares represent 2.9 percent of the company’s issued stock.
Shoprite fell 5.74 percent on the JSE to close at R211.95 on the back of the sale. Nishlen Govender, Portfolio Manager, Citadel, said that the announcement sent panic among institutional investors, sending the share down 5.74 percent to close at R211.95 from Tuesday’s closing price of R224.89 a share.
“We hold Shoprite and believe that the current price, and thus the price offered, is reasonable, as the group has sold down significantly since March,” Govender said. “The group remains well managed, as evidenced by class leading operating margins and return on capital. Shoprite is in a strong position to negotiate a competitive local food retailing environment, given its scale, strong management team and advantages in supply chain and procurement.”
Wiese has been on a massive selling spree since the near collapse of Steinhoff International in December.
The Shoprite shares will be sold through an accelerated bookbuild, in which Morgan Stanley, Rand Merchant Bank and Barclays Africa Group’s Absa Capital are the joint book runners.
Wiese has been selling assets to raise money since the troubled retailer Steinhoff admitted to accounting irregularities in December.
He has sold nearly R4.2bn worth of Shoprite stock over three separate deals in the wake of the scandal.
However, the analysts believe despite Wiese and Steinhoff going through some challenges, Shoprite was still a good opportunity for investors.
Nesan Nair, a senior portfolio manager at Sasfin Securities, said the market was concerned about Wiese’s overhang, as he has problems across most of his investments.
Nair said even Steinhoff Africa Retail could create more short-term volatility for Shoprite, as Wiese was forced to raise liquidity.
Nair, however, stressed that Shoprite remained a good investment for the long-term. “They are a first class retailer, with a deep pool of talented managers that really understand how to retail in Africa,” Nair said. Wiese is Shoprite’s current chairperson.
Govender said Shoprite would bounce back, given the strategic direction on which the group has embarked a number of years ago. He said despite the panic yesterday, investors would likely reap rewards in the future.
“We also like the defensive quality of this retailer relative to others, as we continue to believe that the marginal SA consumer continues to face significant strain,” Govender said.
“Christo Wiese will likely remain chairperson and non-executive director at Shoprite as well as key anchor shareholder, despite the recent share disposal,” Govender said.