Wedding crasher Steinhoff takes on European retailers

Steinhoff's stock more than doubled in the past three years, pleasing investors such as billionaire Christo Wiese. Picture: Sharief Jaffer
Steinhoff's stock more than doubled in the past three years, pleasing investors such as billionaire Christo Wiese. Picture: Sharief Jaffer

London - There’s a South African wedding crasher on the loose in Europe who’s determined to upend the retail industry.

Steinhoff International CEO Markus Jooste has pounced twice in two weeks to break business betrothals in France and England with almost R46.4bn of unsolicited bids.

First, he offered £1.4bn to head off J Sainsbury’s takeover of Home Retail Group, then £662m to scuttle Groupe FNAC SA’s acquisition of Darty.

The unprecedented double raid shows how far the racehorse owner is prepared to push the 52-year-old retailer to compete with Ikea.

In December, he moved Steinhoff’s main listing from Johannesburg to Frankfurt and its headquarters to Amsterdam to woo more investors in Europe, which now accounts for the bulk of its R135bn in annual revenue. Adding Darty and Home Retail, owner of the Argos household-goods chain, would hasten that shift and also stop its competitors getting bigger.

Jooste’s “seeming consolidation of European retail” is moving full speed ahead, said Graham Renwick, an analyst at Exane BNP Paribas. “With a strong track record of sales and margin progress from a litany of M&A, we see this as another positive step in the growth of Steinhoff.”

6 500 stores

The renewed focus on Europe is a return home for the company, which started out in Cold War Germany selling furniture sourced on the Soviet side of the Iron Curtain to customers on the other.

It now has 6 500 stores in 30 countries, employs 90 000 people and has a market value of about €20bn (R337.5bn). The stock more than doubled in the past three years, pleasing investors such as billionaire Christo Wiese.

The approach for electronics retailer Darty is being made through Conforama, the French furniture chain that Jooste bought for €1.21bn (R20.4bn) in 2011. The CEO has since acquired Africa’s Pepkor for about R78bn and added Poland’s largest non-food retailer and Australia’s Best & Less clothing chain.

Jooste, 55, is seeking to further “internationalise the group and move away from its domestic currency,” according to Wayne Brown, an analyst at Liberum.

Jooste was traveling in New York and unavailable for comment. Darty declined to comment beyond a statement saying it was reviewing Steinhoff’s proposal.

Mirroring JAB

Steinhoff’s strategy for taking on Ikea, the world’s largest home-furnishing retailer, mirrors that of JAB, which is challenging Nespresso maker Nestle SA in the coffee industry through a slew of acquisitions. JAB, which manages the fortune of Austria’s billionaire Reimann family, in December paid R216.5bn for Keurig Green Mountain, a maker of single-serve brewers.

Jooste’s 125 pence-a-share proposal boosted Darty shares on Wednesday, while hurting those of FNAC. Like its offer for Home Retail, Steinhoff is offering cash, compared with FNAC’s all- share bid, currently worth about 117 pence apiece. HSBC is advising Steinhoff on both bids.

Under CEO Regis Schultz, Darty is expanding its online offering and adding stores in smaller French towns to gain customers. The company has a goal of lifting its share of French spending on products including washing machines and televisions to about 20% from 15%.

Bidding war?

If Darty accepts the offer, Jooste would not only prevent Conforama’s two largest competitors from joining forces, he’d also be able to achieve “at least” the €85m of savings from the tie-up that FNAC has forecast, according to Exane’s Renwick.

But instead of producing a quick victory, Liberum’s Brown said Jooste’s surprise attack may end up sparking a bidding war that draws in more suitors.

Brent Crude
All Share
Top 40
Financial 15
Industrial 25
Resource 10
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
I'm not really directly affected
18% - 1603 votes
I am taking a hit, but should be able to recover in the next year
23% - 2103 votes
My finances have been devastated
35% - 3166 votes
It's still too early to know what the full effect will be
25% - 2281 votes