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Shoprite, Africa’s biggest supermarket chain, and the South African furniture maker Steinhoff called off a merger of their assets on the continent, setting back Steinhoff’s dealmaking ambitions to become a major international retailer.
Shares in both companies rose 7 per cent on Monday on news of the termination of talks, after concerns by Shoprite investors that the deal undervalued their shares.
Christo Wiese, South Africa’s richest man and the biggest shareholder in both companies, pushed for talks late last year on the merger, which would have created a separately-listed company, Retail Africa.
Mr Wiese initially had the support of South Africa’s powerful Public Investment Corporation, which manages assets of the government employee pension fund.
The deal could have eventually led to a full takeover by Steinhoff of Shoprite, which has a market capitalisation of $8bn, creating an African retail giant worth $30bn.
But on Monday the companies said that “the PIC, Titan [Mr Wiese's investment vehicle] and Steinhoff could not reach agreement” on the ratio at which shares in the two companies would be exchanged.
If the deal had gone ahead, Shoprite would have issued shares to Steinhoff in return for assets including regional operations of Pepkor, a retailer Steinhoff paid $6bn for in 2014.
Steinhoff would also have bought the PIC’s and Titan’s stakes in Shoprite, which may eventually have given it control of Retail Africa.
In a statement, Steinhoff said that although the merger “presents exciting opportunities for the Companies and their respective management teams, the fact that the relevant parties could not reach an agreement in respect of the Share Exchange resulted in the negotiations being terminated.”