Shoprite founder and chair Christo Wiese says there is no plan on the table to deal with his 265-million deferred Shoprite shares, which control 32.3% of the group’s votes.
"People are always talking to me about the deferred shares but there is nothing on the table right now," said Wiese days after the release of a disappointing set of results knocked the Shoprite share price to R116, its lowest level in nine years.
At this level Wiese’s 82-million Shoprite shares are worth just R9.5bn, down from a record high of R22bn in March 2018, when the share briefly traded at a high of R267. Thanks to a price-protection collar Wiese was required to put in place in June 2018, he has been shielded from the full extent of the drop, securing a price of about R210 for 17-million, or 21%, of his Shoprite shares.
Weaker sentiment
Wiese, who has had to contend with a loss of value in many of his listed investments such as Steinhoff, Brait and Invicta, said much of Shoprite’s share price recent weakness was attributable to the generally weaker sentiment towards the retail sector. "But that is where the market is," said Wiese, who holds 14% of Shoprite’s ordinary shares in addition to all of the unlisted deferred shares.
The 97% collapse in the Steinhoff share price since announcing financial irregularities in December 2017 wiped out $2.2bn of Wiese’s estimated $5bn net worth. Within days of the December 2017 announcement Wiese was forced to sell 10-million of his shares to cover obligations to his lenders. He received an average selling price of R215 per share at the time.
In June, Africa’s largest grocer announced that a proposal to exchange Wiese’s deferred shares for 20-million new Shoprite shares, valued at about R178 each, was being abandoned in the face of shareholder opposition. A condition of the deal was that no more than 15% of the 58% minority shareholders (non-Wiese shareholders) opposed the transaction.
Coronation’s chief investment officer, Karl Leinberger, said the 20-million new Shoprite shares were an extremely high price to pay to extinguish a comparatively low level of risk.
Sasfin senior analyst Alec Abraham said he did not see what value the shareholders were getting. "The true value of the deferred shares is questionable," he said at the time.
Last week Abraham said he saw little reason for the ordinary share to trade above its current level given the uncertainties facing the group.
One analyst, who did not want to be named, said it was unlikely Wiese would be interested in trying to unlock his deferred share position at the current Shoprite price.
"The proposed 2017 tie-up between Steinhoff and Shoprite would have seen Wiese get Steinhoff shares valued at about R3.5bn for the deferred shares; in line with what was on the table earlier in 2019. A deal at current prices might get him R2.3bn," said the analyst, adding that if the Steinhoff tie-up had been concluded the additional Steinhoff shares would now be worth very little. The deal was aborted after the December 2017 Steinhoff implosion.
Last week Wiese appeared phlegmatic about Shoprite’s results. "We’ve been through these sorts of situations before," he said about the company he founded 40 years ago and listed on the JSE 33 years ago.
In the short term investors should not expect the same sort of returns from non-SA Africa as they get from SA, he said.
Outside SA the group had to invest in properties, which lowered the return, Wiese said.
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