Steinhoff International to buy 51% stake in Shoprite for USD2.6 billion

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As part of its plan to go pan-African, Steinhoff International said it will buy a controlling stake in Shoprite, Africa’s largest grocery retailer for USD2.6 billion.

Steinhoff International is an integrated retailer that manufactures, sources and retails furniture, household goods and general merchandise in Europe, Australasia, the United States and Africa.

After its plan to merge with Shoprite failed, Steinhoff International floated STAR, an African retail holding company under which it plans to list all its retail companies on the Johannesburg Stock Exchange.

Steinhoff International said in a statement that it has perfected its move for the deal by entering into a call option agreements with Titan Premier Investments, a company ultimately controlled by a family trust of Steinhoff and Shoprite chairman Christo Wiese, as well as the Public Investment Corporation (PIC) and Lancaster Group.TAR to extend a mandatory offer to the remaining Shoprite shareholders,” Steinhoff said.

To finalise the transaction, STAR will extend a mandatory offer to the remaining Shoprite shareholders.

The consideration payable will be settled in STAR shares and will value the ordinary shares, deferred voting shares and cash at a combined ZAR35.5 billion.

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The deal will mark a watershed in Africa’s retail landscape as two of the largest retailers will be doubling down on their investments across the continent.

In its last six months result, Shoprite said its gross revenue for the first half of the year jumped by 10.4% to ZAR140.7 billion.

Using real-time exchange rate total revenue for the period stood at USD10,8 billion. On a like for like basis, revenue for the period rose by 5.8%.

The company noted that challenging trading conditions in South Africa continued in the second half of the year, however, the South African supermarket operation increased sales by 10.1% (7.7% if compared to 53 weeks). On a like-for-like basis, sales increased by 6.9%. Internal inflation slowed to 5.9% for the period from the 7.4% in December as the impact of the drought began to ease and compares to 3.9% in the prior year.

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The group’s non-RSA countries such as Nigeria and Angola saw a higher growth rate of 13.5% year on year. Shoprite noted that lower commodity prices and the devaluation of certain currencies had a material impact on prices of imported products during the latter part of the year. On a like-for-like basis, sales increased by 1%.

Shoprite said at constant currencies, sales grew by 33.8% (31.6% on a 53-week basis). The fourth quarter, in particular, is where the previous high base in Angola’s sales impacted growth for the year.

Shoprite Holdings is primarily listed on the Johannesburg Stock Exchange, JSE. The company was founded by Christo Wiese. The company has expansive retail operations in Nigeria, where it is not quoted. Shoprite competes with Spar, Game and other medium-sized modern retailers across Nigeria’s economic hubs.

The group operates 2,653 outlets in 15 countries across Africa and the Indian Ocean Islands and reported turnover of R71.297 billion for the six months ended December 2016.


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