Steinhoff could double market cap in next five years, says Christo Wiese
by Liezel Hill
2016-08-19 12:01:04.0
STEINHOFF International is not done with deals and has the potential to double its market value over the next five years, according to the chairperson and largest shareholder of the acquisition-hungry South African retailer.
Steinhoff, which earlier in August agreed to buy Mattress Firm for $2.4bn, has the ability to fund more takeovers and could even accelerate the pace of its deal-making, billionaire Christo Wiese said in an interview on Wednesday.
"It’s in Steinhoff’s DNA," Wiese said at the Cape Town head office of Pepkor, the business he sold to Steinhoff two years ago for $5.7bn. "That’s what you’re seeing: it’s just more of the same."
Acquisitions including Pepkor and French furniture chain Conforama have transformed Steinhoff, which employs 90,000 people and has more than 6,500 stores in 30 countries from the UK to Australia. The German-listed company has a market capitalisation of almost €24bn and a doubling of that is "entirely" possible, said Wiese, SA’s richest man with a net worth of $7.7bn, according to the Bloomberg Billionaires Index.
The stock declined 1.4% to €6.059 as of 9.22am on Friday in Frankfurt, where the company moved its primary listing from Johannesburg in December. Steinhoff has retained a secondary listing in Johannesburg.
Steinhoff CEO Markus Jooste is seeking to create a global retail group that’s focused on the "value" end of the market, Wiese said. That ambition led the company to its two most recent acquisition targets, Mattress Firm and UK discount chain Poundland. Also this year, Steinhoff has failed in bids for Britain’s Home Retail Group and French electronics retailer Darty. The company raised its agreed bid for Poundland earlier this month to smooth completion of the deal.
The UK’s vote to leave the EU has not put Steinhoff off that country, where it also owns the Bensons for Beds chain, Wiese said.
"What was very impressive was how, in a short a space of time, the Brits managed to steady the ship," after the vote, he said. "A new prime minister, new ministers with apparently excellent credentials, and making the right noises, and the ship has steadied after the initial panic reaction of the markets."
Growth potential
Explaining Steinhoff’s acquisition strategy, Wiese said the company looks for targets with strong management teams, good cash generation and the potential for growth, as well as "sheer size".
"You want to be a number one, two or three player in the sectors that you identify," he said. "That requires scale."
To maintain its investment-grade credit rating, Steinhoff has self-imposed restrictions on the levels of debt it will assume, Wiese said. Moody’s Investors Service gives the company a Baa3 rating, just one level above junk.
The rapid-fire pace of dealmaking at Steinhoff this year was "purely an accident of timing," and could either continue, slow or even accelerate, according to Wiese.
The company has "many propositions, proposals, opportunities on our desks", he said, while declining to comment on potential targets.
Bloomberg
Christo Wiese. Picture: FINANCIAL MAIL
STEINHOFF International is not done with deals and has the potential to double its market value over the next five years, according to the chairperson and largest shareholder of the acquisition-hungry South African retailer.
Steinhoff, which earlier in August agreed to buy Mattress Firm for $2.4bn, has the ability to fund more takeovers and could even accelerate the pace of its deal-making, billionaire Christo Wiese said in an interview on Wednesday.
"It’s in Steinhoff’s DNA," Wiese said at the Cape Town head office of Pepkor, the business he sold to Steinhoff two years ago for $5.7bn. "That’s what you’re seeing: it’s just more of the same."
Acquisitions including Pepkor and French furniture chain Conforama have transformed Steinhoff, which employs 90,000 people and has more than 6,500 stores in 30 countries from the UK to Australia. The German-listed company has a market capitalisation of almost €24bn and a doubling of that is "entirely" possible, said Wiese, SA’s richest man with a net worth of $7.7bn, according to the Bloomberg Billionaires Index.
The stock declined 1.4% to €6.059 as of 9.22am on Friday in Frankfurt, where the company moved its primary listing from Johannesburg in December. Steinhoff has retained a secondary listing in Johannesburg.
Steinhoff CEO Markus Jooste is seeking to create a global retail group that’s focused on the "value" end of the market, Wiese said. That ambition led the company to its two most recent acquisition targets, Mattress Firm and UK discount chain Poundland. Also this year, Steinhoff has failed in bids for Britain’s Home Retail Group and French electronics retailer Darty. The company raised its agreed bid for Poundland earlier this month to smooth completion of the deal.
The UK’s vote to leave the EU has not put Steinhoff off that country, where it also owns the Bensons for Beds chain, Wiese said.
"What was very impressive was how, in a short a space of time, the Brits managed to steady the ship," after the vote, he said. "A new prime minister, new ministers with apparently excellent credentials, and making the right noises, and the ship has steadied after the initial panic reaction of the markets."
Growth potential
Explaining Steinhoff’s acquisition strategy, Wiese said the company looks for targets with strong management teams, good cash generation and the potential for growth, as well as "sheer size".
"You want to be a number one, two or three player in the sectors that you identify," he said. "That requires scale."
To maintain its investment-grade credit rating, Steinhoff has self-imposed restrictions on the levels of debt it will assume, Wiese said. Moody’s Investors Service gives the company a Baa3 rating, just one level above junk.
The rapid-fire pace of dealmaking at Steinhoff this year was "purely an accident of timing," and could either continue, slow or even accelerate, according to Wiese.
The company has "many propositions, proposals, opportunities on our desks", he said, while declining to comment on potential targets.
Bloomberg
