Steinhoff Plans Africa Spinoff After $3 Billion Expansion

(Bloomberg) -- Steinhoff International Holdings NV plans to list its African assets separately as the acquisitive retailer seeks a new prize for shareholders following this year’s failed merger talks with Shoprite Holdings Ltd.

The company said Wednesday it will seek to list businesses including clothing retailer Pepkor and furniture chain JD Group Ltd. on the Johannesburg Stock Exchange, about 18 months after moving its primary listing to Frankfurt from the South African commercial hub.

The new business could be worth as much as 60 billion rand ($4.5 billion), said Evan Walker, a money manager at 36one Asset Management in Johannesburg, although the valuation could also be as low as 40 billion rand depending on how much debt Steinhoff puts into the vehicle.

The move reflects the parent company’s transformation into a global retail giant with about two-thirds of its revenue generated outside Africa -- a proportion that’s growing after Steinhoff last year spent more than $3 billion on takeovers in the U.K., U.S. and Australia. The listing is aimed at creating value for Steinhoff investors, including billionaire Christo Wiese, after a roughly 10 percent drop in the shares since discussions with Shoprite ended in February.

The listing will give the African unit a “stand-alone track record” that may “open fresh options with Shoprite further down the line,” said Sasha Naryshkine, an analyst at Vestact Ltd., a Johannesburg-based money manager, which has a buy recommendation on the stock. Steinhoff may use the money raised to reduce rand-denominated debt and to expand its distribution in Africa, he said. It may also help South Africa’s Public Investment Corp. take a bigger stake in the newly listed company, he said.

Natural Progression

The planned separation is “a natural progression” for Steinhoff following its expansion, the company said in a statement. Wiese, 75, became Steinhoff’s biggest shareholder when he sold clothing chain Pepkor to the company for 62.8 billion rand in 2014. He is also the largest investor in Cape Town-based Shoprite, and was at the heart of the combination talks between the two companies.

In addition to Pepkor and JD, Steinhoff’s African assets include sports-shoe specialist Tekkie Town and Poco furniture stores. Combined sales for the company’s businesses on the continent were 4.3 billion euros in the 12 months through September.

The shares fell 0.9 percent to 4.51 euros at 10:22 a.m. in Frankfurt, extending Wednesday’s 2.8 percent drop. They’ve declined 8 percent this year.

Outside Africa, the company’s recent acquisitions have included U.K. discount chain Poundland Group Plc, Mattress Firm Holding Corp. of the U.S. and Australia’s Fantastic Holdings Ltd.

Steinhoff said it will retain a controlling interest in the new company. The move will include a capital raising to achieve the appropriate level of public ownership, it said.

Steinhoff appointed Citigroup Inc., Investec Plc, Morgan Stanley and FirstRand Ltd.’s Rand Merchant Bank to advise on the proposed listing, which is subject to market conditions and regulatory approvals.