Steinhoff, Shoprite tie-up "natural" - billionaire Christo Wiese - CNBC Africa

Steinhoff, Shoprite tie-up "natural" - billionaire Christo Wiese

Financial

by Tiisetso Motsoeneng and Wendell Roelf 0

Photo: Pixabay

CAPE TOWN (Reuters) - It would be a "natural development" for international retail group Steinhoff to take over Shoprite , Africa's biggest supermarket chain, South African retail tycoon Christo Wiese told Reuters.

Wiese is the largest shareholder in budget store Shoprite as well as lower-end furniture, apparel and household goods retailer Steinhoff. Bringing the two together would allow him to add groceries to his sprawling discount empire.

The merger, if it happens, would also pull together Wiese's retail assets under one roof following Steinhoff's nearly $6 billion acquisition in 2014 of the magnate's budget clothing retailer Pepkor and create a global retail giant worth at least 400 billion rand ($30 billion).

"People will speculate about that," he told Reuters in a rare interview on Tuesday at his modest offices overlooking factories in the dusty northern Cape Town industrial suburb of Parow.

"People know that I am 75 years old, and I fortunately have a son who is in business with me, but as a family we are continually looking at consolidating our business interests. So, it would be, in a way, a natural development."

Since Steinhoff's Pepkor acquisition, some analysts have wondered if Wiese, along with Shoprite's chief executive Whitey Basson and Steinhoff's Markus Jooste were working on a tie-up.

Wiese, who describes himself as a "realist, pragmatist", started Pepkor in the 1960s, in Upington on the southern edges of the Kalahari desert, after spotting an opportunity to bring cheaper clothes to the poor.

He then transformed budget chain Shoprite from a six-store company in the 1970s to one with hundreds of stores across Africa, from South Africa to the Democratic Republic Congo, dwarfing rivals including Wal-Mart's South African unit Massmart.

His discount strategy, which also now includes investments in clothes retailer New Look, has catapulted him to the cover of Forbes magazine as one of Africa's richest businessmen.

"Why is it so successful? ...The people who earn a lot of money are a small portion and then at the base is where your mass market is, where people have limited disposable income and we're aiming at that market," he said.

Wiese studied law in Stellenbosch, a close-knit town dominated by Afrikaans-speaking whites, but lives in Clifton, an area of Cape Town overlooking the Atlantic Ocean with some of South Africa's most expensive properties.

He owns a high-end vineyard near Stellenbosch, an area dotted with executive golf clubs, but said he "finds playing golf boring."

 

NEW LOOK

Wiese is also a top shareholder and board member in South African investment heavyweight Brait SE, which last year bought gym chain Virgin Active, a relative outlier in his business model as it targets middle-class consumers.

More in line with the low-cost theme, was Brait's purchase of no-frills retailer New Look.

Wiese said Brait's "most obvious" growth trajectory was through its existing businesses that also include U.K. supermarket chain Iceland Foods and South African staples foods maker Premier.

"There is plenty of scope (to grow). It's got a strong management team and the biggest scope lies within the existing businesses. New Look for instance, our clothing retail operation in the UK, has identified China as a major growth area," he said.

Wiese said New Look was looking to open 500 stores within three years in China, where it already runs 90 outlets.

"China is an enormous market," Wiese said, describing the New Look's store expansion plan as a "drop in the ocean" given the size of the Chinese population.

Virgin Active, which has taken top spot market in Italy and its biggest chain is located in South Africa, has identified Asia-Pacific as the next growth market thanks to a growing population of health-conscious consumers, he said.

Wiese was optimistic for the outlook for Europe despite gloomy economic forecasts but was cautious about the idea of snapping up cheaper assets in Britain following its June vote to leave the European Union.

"Undoubtedly it does offer opportunities but there are greater risks because none of us know how it (Brexit) is going to play out," he said. "There are studies that show that by 2040, Britain will have a bigger economy than Germany and a population of over 80 million people, that's a market you can't ignore."

 

POLITICAL DAMAGE

In South Africa, several businessmen, including the outspoken chief executive of gold miner Sibanye has called for President Jacob Zuma to resign after a series of scandals.

Wiese said as a businessmen rather than a politician, he would like to stay out of politics.

However, he said that the country's leadership was hurting Africa's most industrialized economy, which is expected to grow below 1 percent this year.

"It is clear to a blind man that today the top leadership in the government is seen as a problem. It is not helping our economy. That is a fact of life," he said.

But Wiese also dismissed suggestions by some analysts that he was looking to preserve his wealth by moving assets abroad during the political turbulence that has also drawn in Finance Minister Pravin Gordhan.

On the contrary, he said he expected business to continue to expand, including its interests in South Africa, with Virgin Active for example having its head office in London but earning more than 60 percent of its EBITDA, or core profit, in South Africa.

"There is no bias to disinvest - in fact the very opposite," he said.

 

(Editing by Ed Cropley and Anna Willard)

 

Comments