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Steinhoff/Shoprite -Joint detailed cautionary announcement relating to the establishment of African retail champion
Steinhoff International Holdings N.V. Shoprite Holdings Limited
(Incorporated in the Netherlands) (Incorporated in the Republic of South Africa)
(Registration number: 63570173) (Registration number: 1936/007721/06)
Share Code: SNH JSE Share Code: SHP
ISIN: NL0011375019 NSX Share Code: SRH
("Steinhoff" or the “Company”) ISIN: ZAE000166997
("Shoprite")
JOINT DETAILED CAUTIONARY ANNOUNCEMENT RELATING TO THE ESTABLISHMENT OF AN AFRICAN RETAIL CHAMPION
1. Background
Shareholders of Steinhoff and Shoprite are hereby advised that the largest shareholders of both
companies, namely the Public Investment Corporation SOC Limited (“PIC”) and Titan Premier
Investments Proprietary Limited (“Titan”) (a company ultimately controlled by a family trust of Dr.
Christo Wiese) have initiated and facilitated discussions between the Steinhoff and Shoprite boards
of directors regarding the potential combination of their respective African retail businesses, with the
objective of establishing a diversified African retail business of significant scale and international
geographical reach that could be regarded as the retail champion of Africa (“Retail Africa”)
(“Proposed Transaction”).
The vision to create Retail Africa, which will be a formidable entity, having its roots firmly entrenched
in Africa, is shared by both the PIC and Titan. Accordingly, both shareholders have indicated that
they are fully supportive of an initiative which could lead to the creation of Retail Africa.
In terms of the Proposed Transaction, it is envisaged that Shoprite will acquire Steinhoff’s African
retail operations, consisting of:
- Pepkor Africa: Pep SA, Ackermans, Speciality Group, including Shoe City, John Craig,
Refinery and Dunns, as well as the Pep and Ackermans African operations;
- JD Group: Russells, Bradlows, Rochester, Incredible Connection, Hi-fi Corporation,
Sleepmasters and financial services;
- Steinbuild, including Buco, Pennypinchers, Timbercity and Hardware Warehouse; and
- Tekkie Town (collectively known as “Steinhoff Africa Retail”).
Shoprite will issue new ordinary shares to Steinhoff in consideration, pursuant to which Steinhoff will
receive a significant equity interest in Shoprite. The value for Steinhoff Africa Retail will be negotiated
taking into account the best interests of both Steinhoff and Shoprite shareholders.
From Shoprite’s perspective, the Proposed Transaction is expected to position the combined
businesses of Retail Africa as the leading multi-format discount retailer on the African continent.
Retail Africa, locally bred, will have the required size and scale to compete with any other
international retailer, making it a compelling value proposition for Retail Africa’s value conscious
African customer base. As the largest retailer in Africa, Retail Africa will employ approximately
186,000 people. It is expected that the Proposed Transaction will further enhance Retail Africa’s
position as an employer of choice and it is also anticipated that the Proposed Transaction will not
result in any job losses. The combined group’s growth plans could lead to future job creation in
various countries.
In addition to the above, Steinhoff has entered into an in principle agreement with the PIC and Titan
to acquire their interests in Shoprite as part of the Proposed Transaction in the form of a Steinhoff
share-for-Shoprite share exchange, subject to an exchange ratio to be agreed (“the Exchange
Ratio”) which may ultimately result in Steinhoff acquiring control of Retail Africa. This Exchange
Ratio will be negotiated taking into account the consideration price for Steinhoff Africa Retail on the
basis that the Proposed Transaction will not be earnings dilutive to Steinhoff shareholders.
In addition, Steinhoff may be required to extend a mandatory offer based on the same Exchange
Ratio to other Shoprite shareholders to acquire their Shoprite ordinary shares (“Offer”). If this is the
case, such Offer will be in the form of a Steinhoff share-for-Shoprite share exchange, at the
Exchange Ratio. Shoprite shareholders will, however, at all times have the election right to retain
their exposure to listed Retail Africa directly or be free to choose to accept the Offer, should it be
made.
The boards of directors of both Shoprite and Steinhoff remain fully supportive of maintaining Retail
Africa’s separate listing on the Johannesburg Stock Exchange and are committed to the preservation
of an appropriate free float of Retail Africa ordinary shares.
2. Rationale
The Proposed Transaction will result in Steinhoff’s African exposure being held through a strategic
interest, within a separately listed entity with sufficient liquidity, which can be independently valued
as an African retail champion. Additionally, through Retail Africa, Steinhoff’s African assets will be
exposed to additional growth opportunities. The Proposed Transaction would allow Steinhoff, as a
group, to strengthen its exposure and relevance to the African consumer, through the diversified
global retail platform that would include Africa’s leading fast moving consumer goods, household
goods and furniture retailer.
It is expected that Retail Africa’s value proposition will provide its shareholders with a sustainable
business where the growth and margin improvement opportunities are greater than the current
individual businesses. The collective product ranges, expertise, infrastructure and size of Retail
Africa will provide a unique and differentiated customer value proposition, operating in South Africa
and in 14 African countries in which established infrastructure sharing will take place.
These benefits would be likely to include: infrastructure and services sharing; product specialisation;
product diversification; supply chain optimisation; customer loyalty, choice and convenience; and
people management and benefits, such as, access to additional skills, and attracting retail talent.
On a pro forma combined basis, Retail Africa would have had revenue and EBITDA of approximately
ZAR200 billion and ZAR15 billion respectively, for the twelve month period ended 30 June 2016, with
a strengthened balance sheet structure to support further organic and acquisitive growth in its
diverse, but complementary constituent businesses.
3. Cautionary
The boards of directors of Shoprite and Steinhoff have agreed to enter into formal negotiations with
regard to the Proposed Transaction which negotiations, if successfully concluded, may have a
material effect on the price of both companies’ securities. Accordingly, shareholders of both
Steinhoff and Shoprite are advised to exercise caution when dealing in their securities until further
details pertaining to the Proposed Transaction are announced. Any forecast financial information
contained in this announcement has not been reviewed or reported on by the companies’ external
auditors.
Stellenbosch and Cape Town
14 December 2016
Financial Adviser and Transaction Sponsor to Steinhoff
Rand Merchant Bank (A division of FirstRand Bank Limited)
Sponsor to Steinhoff
PSG Capital (Pty) Ltd
Sponsor to Shoprite
Nedbank Corporate and Investment Banking
Legal Advisers to Steinhoff
Cliffe Dekker Hofmeyr Incorporated
Linklaters LLP
Legal Advisers to Shoprite
Werksmans Attorneys
Date: 14/12/2016 12:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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