Shoprite and Steinhoff release full of hot air

Great excitement on the day before the day that marks the last working day of the year for many of us; on December 14, Shoprite and Steinhoff released a Sens statement entitled "joint detailed cautionary announcement relating to the establishment of an African retail champion".

Turns out that was a bit misleading. It should have read: "Lots of fuzzy chat about creating the sort of African retail champion that would ensure the enthusiastic backing of the Public Investment Corporation (PIC), but few real details."

The most important detail left out was the exchange ratio that was going to be used in the Steinhoff share-for-Shoprite share exchange. It was perhaps understandable. The controlling shareholders in these two listed entities – essentially Christo Wiese and the PIC – wanted to get their ducks in a row and see how the market responded to the idea before announcing the very detail that would make or break the deal.

But it’s now almost five weeks later and we’re still waiting for an announcement about that all-important detail. In fact it is so important that on December 14, the joint announcement would have been much more useful if it had merely stated: "The Steinhoff share-for-Shoprite share exchange will be X" and left out all the guff about an African retail champion.

So what’s the delay? Some or other form of this deal has been on the cards for a long time. The plan to pay Shoprite’s just-retired CEO a R50m bonus was the final detail that needed to be sorted out before the go-button could be pushed. That was done months ago. But here we still are, waiting.

And, while we wait, we can hear the minority shareholders, particularly those in Shoprite, muttering about the absence of compelling sense and the danger of being squeezed out at an unacceptable exchange rate.

Meanwhile, in the past week, Shoprite’s share price has recovered a bit of the value it lost on the initial announcement.

Nepi Rockcastle, the real estate business that will result from the merger between New Europe Property Investments (Nepi) and Rockcastle Global Real Estate, should inspire consolidation among other South African property companies that have invaded Eastern Europe.

Several South African commercial property professionals have been criticised over the past few years for investing in countries such as Romania, Poland, Croatia and the Czech Republic. The concern is that they are too inexperienced and unconnected to compete with European investors in the regions. Nevertheless, some South African funds have had early successes, typically choosing to take domestic investment partners.

Nepi got going about a decade ago and soon realised it needed a Polish partner. Rockcastle is that partner.

Another big South African player, Redefine Properties, partnered with Echo Investment in 2016 in Poland. Its rival, Growthpoint Properties, has a Romanian partner. The market is anticipating more information about its expansion in Europe.

Some of the smaller South Africans trying to make waves in the region would do well to consolidate their operations. Prime candidates are Tower Property Fund, which has assets in Croatia, and Accelerate Property Fund, which has invested in Austria and Slovakia.

• Neels Blom edits Company Comment