Shoprite-Steinhoff merger talks collapse

Africa’s biggest supermarket chain Shoprite has called off talks for a possible merger with Steinhoff of South Africa after an agreement could not be reached on the exchange ratio that would apply to the share exchange.

The end of the talks marks a blow to the deal making ambitions of Steinhoff, which is known as “Africa’s Ikea”, to become a major international retailer.

In Zambia, Shoprite runs an expansive network of 29 shops across the country.

In a statement, the companies said the negotiations had collapsed over a disagreement between shareholders over terms.

Christo Wiese, South Africa’s richest man and the biggest shareholder in both companies, brokered talks last year to create a separate listed company, Retail Africa, from the combination of their assets.

Mr Wiese, who owns 16 per cent of Shoprite, had received the support of South Africa’s powerful Public Investment Corporation, which manages the assets of the government’s employee pension fund and holds a 10 per cent stake in the company.

But on Monday the companies said that “the PIC, Titan [Mr Wiese’s investment vehicle] and Steinhoff could not reach agreement” on the ratio at which shares in the two companies would be exchanged.

The deal could have eventually paved the way for Steinhoff to take over Shoprite, which has a market capitalisation of $8bn and stores in 15 African countries including Zambia, creating a retailer worth $30bn.

If the Retail Africa plan had gone ahead, Shoprite would have issued shares representing a “significant equity interest” to Steinhoff, in return for assets including the regional operations of Pepkor, a retailer Steinhoff paid $6bn for in 2014.

Steinhoff would also have acquired the Shoprite stakes of PIC and Titan, leaving a buyout of Shoprite minority shareholders as the last step to a full takeover.

But Shoprite investors lined up to attack the deal after its announcement in December given concerns that the assets offered by Steinhoff undervalued their shares.

In their statement, Steinhoff and Shoprite said that although the merger “presents exciting opportunities for the companies and their respective management teams, the fact that the relevant parties could not reach an agreement in respect of the share exchange resulted in the negotiations being terminated”.