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Shoprite mulls merger with international retailer

By News Express on 28/09/2016

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The Shoprite share price leapt more than 4% after Christo Wiese said it would be a “natural development” for international retailer Steinhoff to take over Africa’s biggest supermarket chain.

Wiese is the biggest shareholder in Shoprite and Steinhoff.
If the companies merge it would pull together his retail assets under one roof following Steinhoff’s acquisition in 2014 for nearly $6bn of Wiese’s budget clothing retailer Pepkor, creating a global giant worth at least R400bn.
“People will speculate about that,” he said in a rare interview on Tuesday at his modest offices in the northern Cape Town industrial suburb of Parow.
“People know that I am 75 years old, and I fortunately have a son who is in business with me, but as a family we are continually looking at consolidating our business interests,” he said.
“So it would be in a way a natural development.”
Since Steinhoff’s Pepkor acquisition, some analysts have wondered if Wiese, Shoprite’s chief executive Whitey Basson and Steinhoff’s Markus Jooste were working on a tie-up.
Although grocery retailing would be uncharted territory for Steinhoff, one fund manager said the company’s propensity to run a decentralised business model would help it pull off any such deal.
“It will be quite a big step, given that the grocery sector is somewhat different to the rest of Steinhoff,” said Lentus Asset Management’s Nic Norman Smith.
“However, Wiese, Jooste and Basson have great experience in their areas. If anyone is going make it work, it’s these three.”
Shoprite’s share price, which had changed little this year, jumped 4.3% shortly after Reuters reported Wiese’s comments, and then extended gains to trade 4.6% higher at R196.69 at 2.53pm GMT.
Johannesburg-listed shares in Steinhoff, which is also listed in Frankfurt, added at least 2% to gains notched up earlier on news that it would issue shares to fund deals. The stock was up 6.2% at R80.70.
Wiese, who calls himself a “realist, pragmatist”, started Pepkor in the 1960s in Upington after seeing an opportunity in selling cheaper clothes to poor people.
He transformed Shoprite from a six-store company in the 1970s to one with hundreds of stores across Africa, from SA to the Democratic Republic of Congo, dwarfing rivals including Wal-Mart’s South African unit Massmart.
His discount strategy, which now includes investments in clothes retailer New Look, catapulted him to the cover of Forbes magazine as one of Africa’s richest businessmen.
“Why is it so successful? ... The people who earn a lot of money are a small portion and then at the base is where your mass market is, where people have limited disposable income ... we’re aiming at that market,” he said.
Wiese studied law in Stellenbosch and lives in Cape Town’s Clifton. He owns a vineyard near Stellenbosch.
He is a top shareholder and board member in South African investment heavyweight Brait, which last year bought gym chain Virgin Active, a relative outlier in his business model as it targets middle-class consumers.
More in line with the low-cost theme, was Brait’s purchase of no-frills retailer New Look.
Wiese said Brait’s “most obvious” growth trajectory was through existing businesses that include UK supermarket chain Iceland Foods and South African staples foods maker Premier.
“There is plenty of scope (to grow). It’s got a strong management team and the biggest scope lies within the existing businesses. New Look for instance, our clothing retail operation in the UK, has identified China as a major growth area,” he said.
Wiese said New Look was looking to open 500 stores within three years in China, where it already runs 90 outlets.
“China is an enormous market,” Wiese said, describing the New Look’s store expansion plan as a “drop in the ocean” given the size of the Chinese population.
Virgin Active, which has taken top spot market in Italy and has its biggest chain in SA, identifies Asia-Pacific as the next growth market thanks to a growing population of health-conscious consumers, he said.
Wiese was optimistic for the outlook for Europe despite gloomy economic forecasts, but was cautious about post-Brexit Britain.
“Undoubtedly it does offer opportunities but there are greater risks because none of us knows how (Brexit) is going to play out,” he said. “There are studies that show that by 2040, Britain will have a bigger economy than Germany and a population of over 80-million people. That’s a market you can’t ignore.”
Wiese said that as a businessmen he would rather stay out of politics, but SA’s political leadership was hurting the economy. “The top leadership in the government is seen as a problem. It is not helping our economy. That is a fact of life,” he said.
He dismissed suggestions that he was looking to preserve his wealth by moving assets abroad during turbulence that has drawn in Finance Minister Pravin Gordhan.
“There is no bias to disinvest – in fact the very opposite,” he said.
•Text courtesy of Reuters.

Source News Express

Posted 28/09/2016 9:54:29 PM


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