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Christo Wiese dumps Steinhoff shares

In an astonishing sign of lack of confidence in Steinhoff International, Steinhoff’s former chairperson Christo Wiese has cut his stake in the troubled retailer, to 6.2percent, regulatory filings show, which may mean that he is no longer the largest shareholder.

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Cape fortunes fall

The Western Cape’s investment tycoons have seen billions of Rands in value wiped away by treacherous economic and political developments at home and abroad. Investors, of late, have endured tough times with the political will to grow a very sluggish local economy alarmingly absent.

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The glitter man

Retail tycoon Christo Wiese – who is known for the odd dabble in the mining sector - looks set to rekindle his passion for diamonds. Last month Wiese emerged as the largest shareholder in Parow-based diamond mining company Trans Hex Group. Wiese – joined by Cape Town-based investment company RECM & Calibre (which owns around 25% of Trans Hex) – is now looking at buying out the remaining smaller shareholders in the diamond company.

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Stellar on the move

CAPE Town-based investment firm Stellar Capital Partners (SCP) – which spearheaded by deal- making whizz Charles Pettit and retail tycoon Christo Wiese – looks ready to rumble.

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Wiese’s sunny disposition

RETAIL tycoon Christo Wiese is an adventurous investor with wide ranging investment interests. But his latest tilt at alternative energy is most surprising – particularly since this unexpected deal was facilitated through a company better known for its acumen in specialised financial services.

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Steinhoff makes waves with European bid (again)

  • Published in Retail

Stellenbosch-based Steinhoff International has made a £662m bid for electrical retailer Darty, the second stealth play in as many weeks, cementing its reputation in the European market as a “notably disruptive figure” in would be corporate mergers. The offer – made by Steinhoff’s Conforama – puts a lower competing share and cash offer from Groupe Fnac on the line, despite the agreement being in place since November 2015.

This move comes just two weeks after Steinhoff’s sneaky £1.4bn offer to buy the UK’s Home Retail Group trumped UK-retailer Sainsbury’s £1.3bn offer for same.   

Conforama’s 125p per share, all-cash offer saw the Darty shares rocket 13% in intraday trade, seeing shares selling as high as 129p.

Darty boasts more than 400 stores, more than half of which are in France. The group also operates online retail platforms such as Mistergooddeal.com.

Business Day reports that Steinhoff may have to rely on its reputation for being an opportunistic and astute dealmaker to win over those who do not see the rationale of a furniture retailer buying an electrical goods retailer.

It goes on to quote Andreas Riemann, analyst with Commerzbank who said he could not see the immediate rationale behind the bid for Darty, but conceded that the group had a good track record with acquisitions.

"Operating margins did not suffer from acquisitions in the past," Mr Riemann said.

Mark Hodgson, an analyst at Avior, said Steinhoff’s size was an advantage as it was bigger than both Sainsbury’s and Groupe Fnac. At a market value of EUR20.4bn, it is around four times the market value of Sainsbury’s, and 20 times that of Fnac.

So why wait until now to make it’s move on both Darty and the earlier Home Retail Group deals?

The UK’s Telegraph reports that Steinhoff’s dual Johannesburg-Frankfurt stock exchange listing was finally agreed in December – the culmination of four year’s work. No small feat in such a volatile market. This listing gives Steinhoff exposure to more European opportunities.

However, with the Frankfurt listing secured, Steinhoff’s French subsidiary Conforama was given the all-clear by the board to ramp up preparatory work on a Darty bid. 

The Telegraph states that with €2.8bn of cash sitting on its balance sheet Steinhoff can easily afford to buy both Argos and Darty and is unlikely to stop there. 

Sources

Business Day
The Telegraph

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Bump and grind for 2016

PROSPECTS for business in the Western Cape for 2016 look daunting. Political ructions have sent the Rand spiralling down against major currencies, the country’s fiscal policies look anything but disciplined and brittle trading conditions, across the board, look overwhelming. But local commerce and industry have proved hardy and resilient over many generations, and CBN expects local business – especially the inventive companies in the Western Cape – to endure tough times thanks to their built-in innovative fortitude. Here are the 16 developments that might bear watching in Western Cape business during 2016.

  • Cash is king for prince of deals Jannie Mouton

Just before 2015 closed out the mighty Stellenbosch-based investment house PSG collected R2,2bn in a book-build offer. Investors literally fell over each other to hurl money at PSG – which has enjoyed huge successes with Capitec Bank and private education venture Curro Holdings. CBN does not expect PSG to sit on that cash for very long, and reckons 2016 could be the year Mouton and his team really move and shake in the deal-making arena. The smart money says watch PSG’s agri-business associate Zeder for new deal-making activities.

  • Private equity appetite

Cape Town-based fresh produce retailer Food Lover’s Market looks set for a growth splurge. The company attracted a R760m investment from private equity investor Actis, which now holds a substantial minority stake in the business (which was founded by local entrepreneurs Brian and Mike Coppin.) Food Lover’s Market has over 120 stores and also operates over 200 FreshStop convenience stores at Caltex service stations. It recently bought artisanal coffee brand Seattle Coffee.
Mike Coppin said the deal with Actis was a great business fit for Food Lovers’ Market’s growth strategy in the future.

  • A word to the Wi(e)se

CBN reckons readers should watch developments at retail tycoon Christo Wiese’s smallest investment – Stellar Capital Partners (SCP.) SCP recently raised R1bn in fresh capital, and is now in the throes of buying full control of Retreat-based electronics manufacturer Tellumat. It seems almost certain SCP will also push for a bigger stake in vibrant industrial company Torre in the year ahead.

  • A steep learning curve

In one of the most unexpected shifts Cape Town investment company Trematon Capital Investments – which owns mainly property investments – made a cautious shift into the private education market by setting up a ‘Generation’ school in Sunningdale - Cape Town’s fast growing north-western suburb. CBN hears the school enrolments for this year were so overwhelming that Trematon is likely to extend the Generation concept to other areas of Cape Town.

  • Taking growth supplements

Steenberg-based health care brands conglomerate Ascendis has more than doubled its market value to close to R5bn since listing in late 2013 after a series of successful acquisitions. CBN understands Ascendis will not be taking a ‘chill-pill’ in 2016, and that several deals – including further offshore forays – are likely to be tabled.

  • Bulking up in the food sector

What chances that 2016 is the year local food companies opt for a consolidation recipe. CBN has a gut feel that the mix of local food companies – ranging from the large like Pioneer Foods and Premier Foods to the more niche offerings of Rhodes Food Group, Quantum Foods and Bounty Brands, Sea Harvest and Premier Fishing – could find new corporate recipes via mergers or takeovers.

  • Flawed but feisty

Parow-headquartered diamond miner Trans Hex Group has struggled through a tough few years. The outlook for diamond prices looks somewhat tarnished, but efforts to bring the recently acquired Namaqualand Mines (acquired from gem giant De Beers) into production could be a critical turning point for Trans Hex.

  • Drinking in new opportunities

Epping-based plastic packaging specialists Bowler Metcalf decision to pour its Quality Beverages soft-drink operations into the larger SoftBev amalgamation looks like it could pay dividends this year. SoftBev hit the ground running by snagging the Pepsi bottling contract, which will test the operational and marketing efficiencies of the new business. If things go as planned SoftBev might look to raising fresh capital to grow the business – an event that might see Bowcalf increase its stake in the company as well as the possible emergence of a new strategic partner.

  • Go west young man

The Saldanha Industrial development Zone (IDZ) will hopefully gain further traction this year. The Western Cape economy certainly needs a dedicated industrial hub to provide extra growth impetus and boost job creation. Let’s hope the oil price, which has driven so many African economies and will stimulate shipping/oil rig maintenance and repair activity, starts firming markedly this year. Increased property activity in the Mykonos precinct seems to suggest things are well on track for an encouraging 2016 on the Weskus.

  • Spurring on Burger King

At the end of 2015, CBN could count 51 Burger King stores scattered around the country (albeit mainly concentrated in Cape Town and Johannesburg.) Empowerment investor Grand Parade Investments has carefully rolled out Burger King to ensure margins are suitably succulent and that the balance sheet is not starved of development capital. CBN wonders whether the year ahead will see GPI capitalise on its relationship with Spur Corporation, in which it has a 10% stake, to accelerate the roll-out of Burger King stores? Spur has a muscular balance sheet with plenty cash, and the company’s experienced management could only add flavour to GPI’s efforts to build GPI into a strong fast food brand.

  • Taming the lion

Iconic empowerment group Brimstone will have its work cut out in 2016 to clean-up a rather unsavoury mess at its shot-term insurance subsidiary Lion of Africa. While Brimstone would probably prefer to be scouting for new investment opportunities, a successful turnaround at the Lion would add to its credibility as determined long-term investors that are not afraid to roll up their sleeves and get stuck into the investment portfolio.

  • Armed to the teeth

Just before the end of the year African Empowerment Equity Investments (the old Sekunjalo Group) finalised a R100m deal to take a 25% stake in defence contractor Saab-Grintek. The deal guarantees minimum annual dividends of R18m, which appears to underpin confidence that Saab-Grintek might be a very industrious investment for AEEI.

  • Raiding the vineyards

There were a number of forays by foreign buyers into the wine sector – including the mergence of buyers from China and India. With the Rand tanking against major currencies, the SA winelands must look like bargain real estate compared to the vineyards up for sale in traditional vino areas like California, Australia and France.

  • The runt might save us

The rout in the Rand after the shock dismissal of finance minister Nhlanhla Nene, and the following debacle around the finance ministry, might well have a silver lining for the Western Cape economy. Looking in the bright side … as a tourist destination the Cape becomes cheaper to overseas visitors, our wine and fruit farmers can bring in additional export revenue and the beleaguered clothing manufacturing sector gets a reprieve as imported garments are no longer cheap.

  • Asset test

Cape Town has traditionally been the home of the asset management industry – what with old school ‘wealth managers’ like Old Mutual and Sanlam calling the city home turf. What will be interesting to gauge, however, in 2016 is whether asset management poster child Coronation Fund Managers – for so long the undisputed market leader – is on a slippery slide and whether feisty newcomer Sygnia is about to unleash a revolution that could completely disrupt the wealth management hub.

  • Stoking the brandy war

It looks like brandy heavyweights Distell and KWV could be at each others throats in 2016 in a bid to secure a viable portion of the fast shrinking brandy market. KWV has already fired the first salvo, intimating that Distell – which owns best selling brands like Klipdrift and Richelieu - is betraying the ‘premiumisation’ of the brandy category with dangerous discounting. It will be interesting to see if KWV plugs away in the premium sector with its award winning brandies…or whether it takes the fight to Distell with a mass market offering.

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Stellar performer

Stellar Capital Partners, the newly constituted Cape Town-based investment company aligned to retail tycoon Christo Wiese, is already making waves. In recent weeks Stellar has triggered a handful of transactions aimed at shaping the business into a vibrant investment vehicle. The spark appears to have been provided by Stellar accepting an offer to buy its 20% stake in vehicle tracking and fleet management firm Digicore. Digicore is being wooed by an American rival Novatel Wireless, and when the mooted takeover deal goes through Stellar will receive proceeds of around R200m.

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Cape industry reinforced for 2015

The past year has been a most trying period for industrial concerns throughout SA – their very viability threatened by a combination of higher energy and labour costs as well as a weak rand and brittle economic conditions locally and abroad.

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