Fin24

Shoprite shares dive on expansion plans

2012-03-22 11:08

Johannesburg - Shares of Shoprite Holdings [JSE:SHP] tumbled 6.7% to R128.42, putting the supermarket chain on track for its biggest one-day decline since 2006, after it said it will raise up to $1bn by issuing new shares and convertible bonds.

The proceeds from the fundraising will be used to shore up its balance sheet and for potential acquisitions, Shoprite said on Thursday.

Shoprite, which has been ramping up operations in African countries beyond its home market, said in a statement it plans to issue up to 27.2 million new shares, equal to about 5% of its current shares.

The grocer said it would also issue R4.5bn of convertible bonds, bringing its total fundraising to R8bn.

The shares and bonds will be offered to certain institutional investors and not open to the public, Shoprite said.

Shoprite, which reported a 19% rise in first-half earnings last month, runs about 950 supermarkets, with 729 of those in South Africa.

It has announced plans to open 12 more stores outside South Africa by the end of June, including in the Nigerian cities of Illorin and Abuja. It also plans to enter the Democratic Republic of Congo.

Shoprite is likely to face tough competition in Africa following Walmart’s entry into the continent, after the US giant’s 51% purchase of discounter Massmart Holdings [JSE:MSM].

Goldman Sachs Group, Morgan Stanley and FirstRand [JSE:FSR] unit Rand Merchant Bank are acting as joint bookrunners.

Shoprite shares tumbled more than 7% in early trade on Thursday on the news of the fundraising.

Shoprite was down 7.4% at R127.50 at 07:04 GMT.

The company said it would use the funds to shore up its balance sheet and for possible acquisitions.