Shares in South Africa’s Shoprite fell more than 5% on Monday as investors digested news that Steinhoff through its African spinoff could acquire a controlling stake in the supermarket operator in a share deal worth R35.5 billion ($2.6 billion).
Steinhoff said on Friday it has established a single holding company, Steinhoff Africa Retail (STAR), and would list it on the Johannesburg Stock Exchange.
It also said it has entered into call option agreements with Titan Premier Investments, a company ultimately controlled by a Wiese family trust, as well as the Public Investment Corporation (PIC) and Lancaster Group under the terms of which STAR could acquire economic and voting interests in Shoprite.
At market open, shares in Shoprite fell 5.60% before paring losses to 4.13% at 200.39 rand by 1152 GMT.
A trader at GT247, Paul Chakaduka, said investors were positioning themselves for STAR in anticipation that it will have a much bigger market capitalisation than Shoprite.
“A lot of the smart money is selling out of Shoprite in anticipation of this move,” Chakaduka said.
“It’s pretty clear to the market that the PIC would rather reduce their holding or participation in Shoprite and would rather put more emphasis on the new listing.”
Once the call options are exercised and implemented, STAR will hold approximately 22.7% of the economic interest and 50% of the voting rights in Shoprite, Steinhoff said.
The PIC, is the second largest shareholder in Shoprite, with a holding of 10.55%, Reuters data showed.
Steinhoff abandoned plans to merge with Shoprite in February, but billionaire Christo Wiese, who is the largest shareholder in both companies and their chairman, has said he wants to consolidate his holdings.
($1 = R13.3756)