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Steinhoff plans Africa spin-off after R40bn expansion

May 17 2017 23:17
John Bowker and Paul Jarvis, Bloomberg News


Company Data

SHOPRITE HOLDINGS LIMITED [JSE:SHP]

Last traded 130
Change -1
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Cumulative volume 105016
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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Johannesburg -Steinhoff International Holdings plans to list its African assets separately as the acquisitive retailer seeks a new prize for shareholders following this year’s failed merger talks with Shoprite Holdings.

The company said on Wednesday it will seek to list businesses including clothing retailer Pepkor and furniture chain JD Group on the Johannesburg Stock Exchange, about 18 months after moving its primary listing to Frankfurt from the South African commercial hub.

The move reflects the parent company’s transformation into a global retail giant with about two-thirds of its revenue generated outside Africa - a proportion that’s growing after Steinhoff last year spent more than $3bn on takeovers in the UK, US and Australia. The listing is aimed at creating value for Steinhoff investors, including billionaire Christo Wiese, after a roughly 10% fall in the shares since discussions with Shoprite ended in February.

READ: Billionaire Christo Wiese invests over R24bn more in Steinhoff

“This is very much a plan B,” Evan Walker, a money manager at 36one Asset Management in Johannesburg, said by phone. “It looks like a last-ditch attempt to get a bit of value in the business.”

The planned separation is “a natural progression” for Steinhoff following its expansion, the company said in a statement. Wiese, 75, became Steinhoff’s biggest shareholder when he sold clothing chain Pepkor to the company for R62.8bn in 2014. He is also the largest investor in Cape Town-based Shoprite, and was at the heart of the combination talks between the two companies.

In addition to Pepkor and JD, Steinhoff’s African assets include sports-shoe specialist Tekkie Town and Poco furniture stores. Combined sales for the company’s businesses on the continent were €4.3bn in the 12 months through September.

Recent acquisitions

Outside Africa, the company’s recent acquisitions have included UK discount chain Poundland Group, Mattress Firm Holding of the US and Australia’s Fantastic Holdings.

Steinhoff said it will retain a controlling interest in the new company. The move will include a capital raising to achieve the appropriate level of public ownership, it said.

“What we don’t know is how much debt they will try and put into the new vehicle,” Walker said. “The valuation will depend on that.”

He estimates a value of R40bn to R60bn for the business to be spun off.

READ: Shoprite changes growth compass as Steinhoff talks fail

Steinhoff appointed Citigroup, Investec, Morgan Stanley and FirstRand’s Rand Merchant Bank to advise on the proposed listing, which is subject to market conditions and regulatory approvals.

The shares fell 2.8% to €4.55 as of the close of trading in Frankfurt.

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