Steinhoff International Holdings NV isn’t done with deals and has the potential to double its market value over the next five years, according to the chairman and largest shareholder of the acquisition-hungry South African retailer.
Steinhoff, which this month agreed to buy Mattress Firm Holding Corp. for $2.4 billion, has the ability to fund more takeovers and could even accelerate the pace of its deal-making, billionaire Christo Wiese said in an interview Wednesday.
“It’s in Steinhoff’s DNA,” 74-year-old Wiese said at the Cape Town head office of Pepkor, the business he sold to Steinhoff two years ago for $5.7 billion. “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 U.K. to Australia. The German-listed company has a market capitalization of almost 24 billion euros ($27.2 billion) and a doubling of that is “entirely” possible, said Wiese, South Africa’s richest man with a net worth of $7.6 billion, according to the Bloomberg Billionaires Index.
Steinhoff Chief Executive Officer 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 U.K discount chain Poundland Group Plc. Also this year, Steinhoff has failed in bids for Britain’s Home Retail Group Plc and French electronics retailer Darty Plc.
The U.K.’s vote to leave the European Union hasn’t 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.
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