WHAT a great speculative scoop on a Shoprite/Steinhoff International deal in Finweek by my colleague (and occasional golfing nemesis) Vic de Klerk.
Vic's normally spot on with his lob wedge around the greens at Pretoria's finest golf estates, and he's not half bad at speculative long shots either when it comes to pinpointing corporate intrigue before it hits the mass media.
I'd reckon - no matter what officially transpires in the days or weeks ahead - there might be a kernel of truth in the suggestion that retail tycoon Christo Wiese is considering swopping all or part of his sizeable stake in supermarket giant Shoprite for a strategic stake in conglomerate Steinhoff.
The market, though, looked duly unimpressed by the news on Monday, with neither Shoprite nor Steinhoff shares showing any inclination to dart up enthusiastically.
Some of my market sources that I canvassed on Monday were sceptical about such an arrangement, pondering where the value of such an exercise may lie. One or two did not discount the possibility, but pointed out that such speculation was perhaps understandable as Wiese has over the years pulled off some adventurous deals.
For me, the issue is really that Shoprite, which - don't forget - was subject of a private equity bid not so long ago, has been Wiese's anchor investment for such a long time that it is difficult to contemplate him giving up all or part of this retail empire.
With Wiese's wealth rooted in such a successful retail concern, it was always understandable why he could afford to venture boldly into new investments. These over the years have included strategic stakes in KWV, Ocean Diamond Mining Holdings, Invicta, Digicore, Sallies (ouch!), PSG and - most recently - White Water Resources.
Provoking merger of minds
Personally, I would not be swapping a stake in Shoprite for Steinhoff, or initiating moves that might led to a merger down the line. The benefits, in my humble opinion, would be skewed towards Steinhoff - which, ultimately, could add another layer of operational diversity.
It's not that I dislike Steinhoff, but Shoprite (and unfortunately I'm not a shareholder) is nearly everything an investor could want in a business.
It's tightly managed by one of the greatest retail minds SA has ever seen, it's a "savings appeal" brand which holds valuable market share in emerging economies and the company holds great growth promise in exciting (if riskier) African markets.
Steinhoff is a very unfocused conglomerate, with interests in furniture manufacturing, timber, building supplies, transport, retail (offshore) and automotive. Despite its sprawling operational profile, it is very profitable with strong cash flows - as can be seen from an impressive set of results in the year to end-June 2009.
In fact, one might be inclined to argue that Steinhoff's diversity (and perhaps more importantly, geographic spread) ensured that its bottom line looked more than respectable in incredibly tough trading conditions.
While I really don't see Shoprite fitting with Steinhoff, putting together great minds like Steinhoff CEO Markus Jooste and Wiese could be rather intriguing in terms of future strategy.
Some investors will remember, though, that Wiese has in the past fallen short of ambitious corporate goals, like the little detour into Boland Bank in the mid-1990s (which, after picking up NBS along the way, ended up as the somewhat disparate and dislocated BoE which was swallowed up by Nedbank).
Then again, Wiese was very shrewd in the late 1990s when he outflanked the mighty Remgro by snaffling a kingmaker stake in Ocean Diamond Mining Holdings (which was sold - much to Trans Hex's dismay - at a massive profit to the now-defunct Namco).
If there is any truth to the current speculation, my gut feel is that that Steinhoff will initially look to taking a small strategic stake in Shoprite.
Oh-so-sexy Shoprite
Steinhoff already holds strategic stakes in two JSE-listed counters: Amaps and KAP International. It also turned a strategic stake in logistics giant Unitrans into a controlling stake, and the company was delisted from the JSE.
Wiese, for his part, has made a habit recently of switching out investment stakes. He (quite cleverly, I might add) swapped his stake in unlisted KWV for one in financial services group PSG, which subsequently has seemed to play a key role in value unlocking endeavours at KWV.
More recently, Wiese cut his (substantial) losses at fluorspar miner Sallies, but retained his penchant for higher risk resource plays by buying into gold and mineral sands exploration company White Water Resources.
Clearly, Wiese is not afraid of change. And quite possibly he is ready to move on from Shoprite into what, in Steinhoff, could be seen as "bigger and better things" on a global scale.
Wiese, when I quizzed him about the recent Sallies sellout, made it clear that an investor could not be married to a stock forever. The separation with Sallies - a torturous affair, if ever - was understandable.
Shoprite is an entirely different story. The company, at least to me, retains an allure of being reassuringly sexy - in other words, something you don't easily let go of.
In this regard, I wonder how many asset managers would be convinced that it was in their client's best interests to swap their Shoprite stakes for a holding in an enlarged Steinhoff. Not too many - if any - I would think...
- Fin24.com