Shoprite and Steinhoff released a joint SENS yesterday withdrawing the cautionary announcement around their proposed merger. The companies announced the termination of negotiations after the PIC, Titan and Steinhoff failed to reach an agreement on the ratio that would apply to the share exchange. Accordingly, shareholders of both Steinhoff and Shoprite have been advised caution is longer required by shareholders when dealing in their securities. In response to the announcement the share prices of Shoprite and Steinhoff ended up +8.64% and +4.96% respectively. While details were always sketchy around the transaction, it’s likely the upward movement of both counters is related to the uncertainty premium unwinding. Speculation from analysts pegged to potential dilution at larger than 5% and the fear around the treatment of minority shareholders was significant. You can email the desk on email@example.com for our 12 month target prices on the stocks.
Africa’s largest retailer, Shoprite, ended 1.23% lower on Friday as it moved to settle at R164.07, despite news that the group is looking to invest $572mn in Angola. Shoprite already has 2,188 stores in 15 countries across Africa, with the vast majority located in South Africa. As a result, the group is seeking to expand in fast-growing sub-Saharan markets, with Angola already replacing Zambia as Shoprite’s biggest contributor to sales outside of South Africa. Lastly, the group is seeking to spend an initial amount of $50mn in Angola and is currently in the process of appointing a commission to negotiate potential tax breaks and other incentives.
Shoprite has been under the cosh of late. Its latest operational update saw the stock sell off 6.33% on the 19th of October. But, as the stock slides down the decline support of its downward channel, there could be a recovery/relief trade for those brave enough to jump in.