Johannesburg – Retail giants Shoprite and Steinhoff have
called off a potential marriage pertaining to their African operations.
In a statement issued on Monday, the companies said the discussions,
initiated by the Public Investment Corporation and Titan Premier Investments –
as the largest shareholders of the companies – have ended.
This, they explain, is because the PIC, Titan and
Steinhoff could not agree a share swap ratio.
“The proposed transaction was investigated and analysed
by the respective management teams of Steinhoff and Shoprite, and although the
proposed transaction presents exciting opportunities for the companies and
their respective management teams, the fact that the relevant parties could not
reach an agreement in respect of the share exchange resulted in the
negotiations being terminated.”
Towards the end of last year, the companies initially
announced they were planning on creating an entity to be called Retail Africa.
Retail Africa was 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
At the time, 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.
Read also: Shoprite, Steinhoff marriage talks continue
Wiese, South Africa’s third-richest person with a net
worth of 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.
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.
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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