Shoprite's Wiese Says He'll Learn From Ended Steinhoff TalksBy
Discussions weren’t a waste; retailers got to know each other
Shoprite looking at expansion outside Africa as profit rises
Shoprite Holdings Ltd. Chairman Christo Wiese kept the door open for future cooperation with Steinhoff International Holdings NV, saying the two retailers had learned more about each other from failed merger talks.
The companies, in which the billionaire owns stakes of 16 percent and 23 percent respectively, called off a plan to combine their African assets on Monday after failing to agree on price. The deal would have created the continent’s biggest retailer, with sales of more than 200 billion rand ($15 billion).
The talks weren’t a waste because the companies “could learn about each other and get to know each other,” Wiese said in an interview after Shoprite’s earnings presentation in Cape Town on Tuesday. There’s “nothing on the table,” he said, when asked if the door is open to another round of talks. “These are two dynamic businesses. Developments are happening all the time.”
For now, Shoprite’s newly appointed Chief Executive Officer Pieter Engelbrecht is aggressively pushing for expansion outside Africa after the continent’s biggest grocer said profit rose 11 percent to 2.44 billion rand ($187 million) in the six months through December. Earnings were boosted as poorer South Africans shopped at its cheaper Usave stores, the best performer among the retailer’s three supermarket brands.
Growth outside the continent will probably be in developing markets such as Turkey and won’t be alongside a partner, Engelbrecht said in an interview.
The shares rose as much as 5 percent in Johannesburg after soaring 8.6 percent on Monday when the plan to merge with Steinhoff was abandoned. That’s the biggest two-day gain on an intraday basis for more than decade. Shoprite is up 11 percent this year, valuing Africa’s biggest supermarket operator at 109 billion rand.
“I certainly believe that a different form of the transaction can still be proposed and implemented,” Soria Hay, head of corporate finance at advisory firm Bavura, said in e-mailed comments.
Sales advanced 14 percent in the six-month period, including 32 percent in the rest of Africa, Shoprite said in a statement. The half-year dividend was raised by 15 percent to 1.80 rand a share.
The company stepped up marketing activity, discounts and cost controls to adapt to weaker economies in sub-Saharan Africa, while lessening the impact of a widespread drought on food inflation by subsidizing staple items, the company said.
“We have structured the business to contend efficiently and profitably under market conditions such as those prevailing currently,” Engelbrecht said. “The second half of the year has started well for us and we are confident this trend will continue.”
South African stores generate almost 80 percent of Shoprite’s total supermarket sales, demonstrating the need to expand internationally. The company also appealed to wealthier consumers through the expansion of its fresh and convenience food offering, which rose four-fold over the Christmas period.
Shoprite shares rose 2.4 percent to 192.51 rand as of 2:59 p.m. in Johannesburg.