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Steinhoff, Shoprite scrap African merger deal on share exchange disagreement

RBR Staff Writer Published 22 February 2017

South Africa based Steinhoff and Shoprite have scrapped their proposed merger deal of forming an African retail giant dubbed Retail Africa owing to a disagreement on the share exchange ratio.

In mid December last year, South African grocery chain Shoprite proposed to buy the African retail assets of Steinhoff International, a furniture and household goods retailer, through an all-share deal.

A joint statement released by two companies regarding the merger cancellation read: “The Proposed Transaction was investigated and analysed by the respective management teams of Steinhoff and Shoprite, and although the Proposed Transaction 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.

“Accordingly, shareholders of Steinhoff and Shoprite are advised that caution is no longer required to be exercised by shareholders when dealing in their Steinhoff and/or Shoprite securities.”

As per the proposed merger agreement, Shoprite was to acquire Pepkor Africa, JD Group, Steinbuild and Tekkie Town businesses of Steinhoff. In exchange, Steinhoff was offered a considerable stake in Shoprite.

The negotiations were initiated by Shoprite’s largest shareholder Titan Premier Investments Proprietary and Steinhoff’s largest shareholder Public Investment Corporation (PIC) which were backing the merger deal late last year.

Following the merger, the plan was to operate Retail Africa in South Africa as well as 14 other African countries through infrastructure and services sharing. Put together, Retail Africa was expected to generate sales revenue of ZAR200bn ($15bn) annually.

The deal received a setback following complaints from the minority shareholders of Shoprite that it was short on details, did not cover cost-savings overlaps and would have resulted in exchanging a superior stock with that of an inferior stock, as reported by Reuters.

The publication had quoted a common investor in both the companies saying that there was a lack of real synergies between the two in forming a combined entity.

Image: Shoprite's retail simulation store at Boland College’s Worcester Campus. Photo: courtesy of Shoprite.