Weak case for 'Steinrite'

Johannesburg - There's very little synergy between supermarket group Shoprite and furniture retailer Steinhoff should the two companies merge, said analysts on Monday, following an article in the October 8 edition of Finweek that the two groups were eyeing each other.

"Other than Steinhoff gaining access to Shoprite's OK Furniture retail chain, it's hard to discern what the synergies would be," said Chris Gilmour of Absa Asset Management Private Clients. "In my opinion and without knowing the finer detail, a full merger appears - on the surface at least - to make little sense."

Nedcor Securities' Syd Vianello expressed similar sentiments, but conceded that a merger could bring value for shareholders in the long term.

Shoprite is South Africa's second-largest supermarket, with a growing footprint on the continent. It has OK Furniture and House & Home trading as its furniture retail business.

On the other hand, Steinhoff is a furniture retailer with more than 50% of its income sourced from its international operations.

Gilmour said it would not be the right thing for the two retailers to merge. "We need to see greater detail on the rationale for a merger. Perhaps there are areas we know nothing about that Steinhoff and Shoprite management could amplify."

Neither Shoprite nor Steinhoff had returned Fin24.com's calls at the time of writing.

- Fin24.com