/ 24 November 2006

Shoprite accepts R13bn buy-out offer from Brait

The board of food retailer Shoprite Holdings has accepted a R13-billion buy-out offer from Brait Private Equity that involves restructuring the company and terminating its listing on the JSE.

A statement issued on behalf of Shoprite Holdings on Friday said the transaction will be funded by a combination of equity and debt.

All existing shareholders will have the opportunity to re-invest in the new entity, alongside Brait, a new broad-based black economic empowerment (BBBEE) consortium and management.

Shoprite chairperson Dr Christo Wiese said the new structure will not only facilitate the introduction of a BBBEE partner, but also enable more members of senior management to own equity in the business.

”Against the background of the growing urgency for increased black participation in the economy, we have identified a broad-based consortium able to contribute substantially to our retail business.

”The new capital structure will greatly simplify the accommodation in the shareholder base of such a consortium, which includes a Shoprite workers’ trust.

”With the continuing skills drain from South Africa, Shoprite is finding it increasingly difficult to recruit talented young professionals and to retain experienced senior managers who have become an easy target for international retail groups.

”To retain their services it has thus become imperative to find mechanisms enabling management to achieve a greater involvement in the financial fortunes of the business,” Wiese said.

In terms of the proposal and as a first step, Shoprite will transfer its business, including its assets and liabilities, to New Retail, a recently created private subsidiary of Shoprite that in time will be converted into a public company. New Retail in turn owns 100% of a subsidiary provisionally known as New Opco in which all the operating companies in the group will be housed.

New Retail will acquire these assets and liabilities for R13,2-billion. It will be capitalised with R9,5-billion of debt sourced from domestic and international markets while the residual will be subscribed for in equity by Brait, the BBBEE consortium, management, re-investing shareholders and the underwriters. Once delisted from the JSE, Shoprite Holdings will be liquidated.

Brait executive director John Gnodde said Brait would be subscribing for R850-million in the new entity. This would give it a shareholding of about 21%.

After the restructuring but prior to the introduction of the BBBEE consortium (anticipated to hold 12%), management is expected to hold about 12%, with the remaining 67% in the hands of the re-investing shareholders or the underwriters.

The transaction will be jointly underwritten by Old Mutual and certain companies owned by Wiese. — Sapa