Plans to merge Shoprite and Steinhoff into retail giant

Shoprite and Steinhoff issued a "joint detailed cautionary announcement" earlier this week saying that they are in talks about the possibility of combining operations to form a new retail entity: Retail Africa. Should the transaction conclude, the newly formed entity will be the largest retailer in Africa, employing some 186,000 staff members.

In early November, it was announced that Pieter Engelbrecht (pictured), Shoprite chief operating officer, would be taking over from Whitey Basson as Shoprite CEO from 1 January 2017. Read more.

According to the aforementioned statement, Shoprite's largest shareholders, the PIC and Titan, are on board with the plans to create Retail Africa. The statement said:

"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. Shoprite will issue new ordinary shares to Steinhoff in consideration, pursuant to which Steinhoff will receive a significant equity interest in Shoprite."

Furthermore, 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, the statement continued.

As part of the merger, it is expected that Shoprite will acquire Steinhoff's African retail operations, comprising Pepkor Africa, Pep SA, Ackermans, Speciality Group, including Shoe City, John Craig, Refinery and Dunns, as well as the Pep and Ackermans African operations, along with the JD Group, comprising Russells, Bradlows, Rochester, Incredible Connection, Hi-fi Corporation, Sleepmasters and financial services; Steinbuild, including Buco, Pennypinchers, Timbercity and Hardware Warehouse; and Tekkie Town.