Shares of the South African retail giant Shoprite are trading almost four per cent higher Wednesday, the day the company announced it had received seventy per cent of proceeds from the sale of its troubled Nigerian unit.
At R160.89 a share, Shoprite is on track for their best day in about two weeks. The group’s shares have risen almost 15% in 2021, and 28% since the start of 2020.
Shoprite, one of the first South African companies to expand into Nigeria in the early 1990s, recently completed the sale of its supermarket business in Africa’s largest economy.
Shoprite had announced its exit from Nigeria in August 2020, and has not put a price on the sale of the business, with the group also closing its last stores in Kenya earlier in 2021. The sale is to a subsidiary of Nigerian property group Persianas Investments.
The terms of the transaction include both a franchise agreement that secures the Nigerian business’s right to continue to use the Shoprite brand. It also includes an agreement that provides for administration and technical support from the Shoprite Group for an initial period of five years.
Shoprite has been trading in the rest of Africa since 1990 and operates in many markets outside South Africa, including Botswana, Madagascar, Mozambique and Angola. The group, under CEO Pieter Engelbrecht, has been assessing the capital needs of its non-South African operations, which generate less than a quarter of group revenue.
In 2013 it considered expansion to 44 Shoprite stores across Nigeria, but halted the expansion project after encountering various challenges in the West African country. In 2019, Engelbrecht said the group would not remain in Nigeria at any cost.
In that year it faced lower consumer demand in Nigeria as locals boycotted South African brands to protest against xenophobic violence in South Africa.
Shoprite follows Tiger Brands, Woolworths and Mr Price in exiting the country, which is seen as a difficult market in which to operate, amid oil price and currency volatility, and difficulties in repatriating funds.
Shoprite said on Wednesday that the transaction took effect on May 23, with 70% of the transaction proceeds having been received and the balance due in four equal instalments over 30 months.
Shoprite, valued at R95bn on the JSE, had treated the Nigerian business as a discontinued operation in its half year to end-December, reporting that assets held for sale amounted to R1.4bn, while the liabilities of these assets stood at R1.56bn.
At the end of December, its core business, Supermarkets SA, made up 78% of group sales, with 1,685 stores under the Shoprite, Usave, Checkers, Checkers Hyper and LiquorShop brands.
It had 417 stores outside South Africa, including its discontinued operations.
