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Steinhoff plans Africa spinoff after $3 billion expansion

Planned move follows collapse of merger talks with Shoprite.

Steinhoff International Holdings plans to list its African assets separately as the acquisitive retailer seeks a new prize for shareholders following this year’s failed merger talks with Shoprite Holdings.

The company said Wednesday it will seek to list businesses including clothing retailer Pepkor and furniture chain JD Group on the Johannesburg Stock Exchange, about 18 months after moving its primary listing to Frankfurt from the South African commercial hub.

The new business could be worth as much as R60 billion ($4.5 billion), said Evan Walker, a money manager at 36one Asset Management in Johannesburg, although the valuation could also be as low as R40 billion depending on how much debt Steinhoff puts into the vehicle.

The move reflects the parent company’s transformation into a global retail giant with about two-thirds of its revenue generated outside Africa — a proportion that’s growing after Steinhoff last year spent more than $3 billion on takeovers in the UK, US and Australia. The listing is aimed at creating value for Steinhoff investors, including billionaire Christo Wiese, after a roughly 10 percent fall in the shares since discussions with Shoprite ended in February.

The listing will give the African unit a “stand-alone track record” that may “open fresh options with Shoprite further down the line,” said Sasha Naryshkine, an analyst at Vestact, which has a buy recommendation on the stock.

Steinhoff may use the money raised to reduce rand-denominated debt and to expand its distribution in Africa, he said. It may also help South Africa’s Public Investment Corporation to take a bigger stake in the newly listed company, he said.

Natural progression

The planned separation is “a natural progression” for Steinhoff following its expansion, the company said in a statement. Wiese, 75, became Steinhoff’s biggest shareholder when he sold clothing chain Pepkor to the company for R62.8 billion ($4.8 billion) in 2014. He is also the largest investor in Cape Town-based Shoprite, and was at the heart of the combination talks between the two companies.

In addition to Pepkor and JD, Steinhoff’s African assets include sports-shoe specialist Tekkie Town and Poco furniture stores. Combined sales for the company’s businesses on the continent were 4.3 billion euros in the 12 months through September.

The shares fell 0.9% to 4.51 euros at 10:22am in Frankfurt, extending Wednesday’s 2.8% drop. They’ve declined 8% this year.

Outside Africa, the company’s recent acquisitions have included UK discount chain Poundland Group, Mattress Firm Holding Corporation of the US and Australia’s Fantastic Holdings.

Steinhoff said it will retain a controlling interest in the new company. The move will include a capital raising to achieve the appropriate level of public ownership, it said.

 

Steinhoff appointed Citigroup, Investec Plc, Morgan Stanley and FirstRand’s Rand Merchant Bank to advise on the proposed listing, which is subject to market conditions and regulatory approvals.

© 2017 Bloomberg

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