Shoprite and the danger of a single story


By Simbo Olorunfemi

There are a million and one reasons an investor can decide to sell its stake in a company, which is what Shoprite announced it has begun a formal process of.

To immediately jump on the bandwagon of those who are shopping for reasons to beat up their country, without taking a good look at the details is sad, even if not surprising.

That there are those ones who are only waiting for something to latch on to before breaking into songs of sorrow is well known. But, at least, take a proper look at the facts on the table before jumping up for the ceiling fan.

An investor can divest from an ongoing entity for a myriad of reasons. It does not necessarily have to be about the business environment or a statement on the sate of affairs in that country. It could be because of a good offer from someone wanting to buy in. It might be that it is a good time to cash out. It could be possibly in need of cash to funnel into another opportunity or meet an urgent need. It might even be a political move, or even an emotional one.
Strive Masiyiwa wants to sell part of his stake in Liquid Telecoms, Africa’s largest fibre company, for a completely different reason.

To immediately proceed with elaborate suppositions and fat theses on how it is the business environment, exchange rate, etc. that push the investor out, might just amount to beating the bush.

The interesting thing about the Shoprite story is that many simply flew off with the headline, talking about loss of jobs, closing of outlets and all that without reading the full story.

Indeed the trading statement by Shoprite did say that its Nigerian subsidiary , “Retail Supermarkets Nigeria Limited MAY BE CLASSIFIED AS A DISCONTINUED OPERATION when ShopRite reports its results for the year. Any further updates will be provided to the market at the appropriate time.”

While many seem to be more interested in the discontinued operation which Shoprite floats as a POSSIBILITY, I am looking at the underlying objective – CLASSIFICATION.

I am also looking at the 4th paragraph and the report that the ‘Group has MANAGED to meaningfully improve on its financial position’ That with respect to LIQUIDITY and NET DEBT. But in that same paragraph, it reported the SALE of its distribution centres to another entity.

This is a trading statement, where words have to be carefully and cleverly put. What I see is that the company is likely worried that it has spread itself thin and is CONCERNED about its DEBT and LIQUIDITY positions, going forward.

Now, back to the paragraph that has jumped at everyone, the one which gave birth to the headline. Whereas the discontinued operations bit is what is of interest to many, my attention is on the introductory few words – “Following approaches from various potential investors…”. Then, this “…the Board has decided to initiate a formal process to consider the potential SALE…”

To tie it all up, this, to me, is about the company. It is about a company concerned about its level of exposure and liquidity position, in need of some cash. On the basis of that, a lot has happened behind the scene informally. It is only when the loose ends have been tied that this FORMAL process was initiated.

I would think that there is already a green-room understanding of how this will turn out -whoever is buying what and under what condition, including the continued role of Shoprite in this. It might even lead to only shares changing hands with the brand name possibly being retained, perhaps for a while. Some of these things are often already figured out before anything goes public.

As it has now been confirmed by an internal memo from the company, they have “identified interested Nigerian investors.”

There are also now reports that the Company claims not to be “pulling out”. Whatever shape things take, it does not look like this would be another stone in the hands of those whose fingers are permanently on a sling, looking for an opportunity to shoot something in the direction of their home.