South African supermarket group Shoprite said on Wednesday it had ended talks on a proposed $2,14-billion buyout from private equity firm Brait, which sent its shares up as much as 5%.
Brait’s bid for Shoprite late last year has been mired in controversy, with minority shareholders unhappy about the price. Brait’s initial bid for Shoprite was at R26 a share, revised to R28 in January.
”It was a bad deal for everybody except for Christo Wiese [Shoprite chairperson] and Brait,” said Gryphon Asset Management chief investment officer, Abri du Plessis.
Shareholders were also unhappy that Wiese, who has 43,3% of votes in the grocer, could vote on a deal in which he stood to benefit, and lodged a complaint with the country’s securities watchdog.
Shoprite said in a statement the two parties had been unable to agree on revised terms after an initial agreement lapsed and due to share-price movements.
The company recorded a 14,9% increase in first-half turnover to R19,1-billion.
Brait’s private equity head John Gnodde told Reuters the firm scrapped the proposed buyout because of recent gains in Shoprite’s shares, which would have pushed the returns on the transaction below its targeted rate.
”We were initially looking at increasing the offer, but it got to a point when it was not making sense for us,” he added.
Wiese was not available for comment.
Shane Watkins, executive director at Peregrine Capital, a minority shareholder in Shoprite, last month told Reuters if the offer was withdrawn, the grocer’s share price would increase to illustrate that the offer undervalued the company.
Brait needed only 50% plus one shareholder to succeed in its bid.
The deal had the backing of Wiese, insurance giant Old Mutual and the country’s biggest fund manager, Public Investment Corporation, which together owned a sizeable chunk of the voting rights. — Reuters