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Shoprite CEO Pieter Engelbrecht says a merger would not make sense now.
Shoprite CEO Pieter Engelbrecht says a merger would not make sense now.

Merger with Steinhoff not an option, says Shoprite CEO

RETAILER NEWS

Bloomberg - Mar 1st 2018, 10:10

Shoprite CEO Pieter Engelbrecht says a merger would not make sense now. 

The two South African retailers were natural bedfellows. They shared a billionaire shareholder and chairman and each had plans for European expansion.

Then Steinhoff International imploded, torpedoing its collaboration with Shoprite.

Before Steinhoff uncovered accounting irregularities in early December, chairman Christo Wiese had embarked on an ambitious project. To bring all his African retail assets under one roof, Wiese devised a way to merge the company’s operations on the continent with Shoprite, the continent’s biggest supermarket chain, in which he is the biggest investor.

That process was well under way when the Steinhoff scandal broke on December 5, leading to an almost 90% plunge in the furniture retailer’s share price.

"There is no sense in that [merging with Steinhoff] now — it’s off the table for good," Shoprite CEO Pieter Engelbrecht said in an interview after presenting half-year results in Cape Town on Tuesday.

Steinhoff’s "mess must be cleaned up".

At Shoprite’s previous outing to report financials in August, Engelbrecht had been looking forward to the opportunities that might have arisen from collaboration. An expansion into Poland, for example, would be an "easy foray", he said at the time, partly due to the ability to share operations and expertise with his erstwhile partner.

That has all changed now.

"Progress in eastern Europe has slowed down a bit with the whole Steinhoff scenario," the CEO said. "It’s now a wait-and-see game."

Yet Shoprite has managed not to let Steinhoff’s demise distract the company from its own growth plans. While the shares suffered a little contagion late in 2017, they have long since recovered and are trading at record levels.

Investors celebrated a 14% interim dividend increase to send the stock higher still on Tuesday, while Shoprite has increased the grocer’s lead in SA, its biggest market. The shares softened on Wednesday.

As for expansion, Engelbrecht is busying himself with a planned move into Kenya, where he aims to fill a hole left by the struggling Nakumatt Holdings chain.

"We are not willing to take too big a risk," the CEO said. "There are lots of things on offer or available, but they are big purchases and most of it is too big in terms of our risk profile," Engelbrecht said.
Bloomberg 

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