Minutes before the market closed on Friday Steinhoff released two SENS announcements, updating us on the listing of their African assets and telling us that they are in the process of getting enough votes to control Shoprite. The new entity is called STAR (Steinhoff Africa Retail) and should be listed by the end of September. Have a look at the comprehensive list of brands currently owned by Steinhoff, always nice to get a refresher:
"The African retail brands included in the Listing will comprise Pep in South Africa and the rest of Africa, Ackermans, Speciality division (comprising Dunns, John Craig, Refinery and Shoe City), JD Group (comprising Russells, Bradlows, Rochester, Sleepmasters, Incredible Connection and Hi-Fi Corporation), Steinbuild (comprising Buco, Timbercity, Hardware Warehouse and The Tile House), Poco South Africa and Tekkie Town (the "African Assets")"
The big news though was that Steinhoff have set up a call option structure between themselves, Dr Christo Wiese (autocorrect keeps changing his surname to 'wise') and the PIC where
STAR (and in turn Steinhoff) will end up with an economic interest of 22.7% and voting rights of over 50% of Shoprite. How does owning 22.7% of Shoprite end up with more than 50% of the voting rights? Due to legacy control structures Dr Wiese has an extra 292 million
Deferred Shares, which have no value but have voting rights. How many voting rights? Around 33.7% of the vote, plus his extra 15.9 % of ordinary shares (which thanks to the deferred shares 15.9% translates into only 10.5%of the vote). In total Dr Wiese has just over 44% when it comes to a vote in Shoprite.
Given that Dr Wiese and the PIC in total own 27.04% (15.9% and 11.05% respectively) it would seem that the PIC have only committed part of their shareholding to the structure. The logic from the PIC seems to be that STAR is going to be a big player on the JSE (Steinhoff management forecast, given it's size that Star will be in the Top 40), so it makes sense to sell some of Shoperite to get a chunky stake in the parent. When the dust settles I estimate that the PIC will have around 4% of Shoprite and 10% of Star. Shoprite is down 2% this morning on the news and Steinhoff are up just under 1%, not major moves.
Assuming that management can stay on top of all the moving parts, I think these companies joining forces is a good thing for shareholders in the long run. After two failed attempts to delist Shoprite are these the first steps in a third attempt?