Africa’s largest retail chain, Shoprite, announced on Monday that it is in the process of divesting from its Nigerian operation — Retail Supermarkets Nigeria Ltd. Going by several media reports, the sale is close to being finalised. Already, there is a new buyer waiting in line to purchase the company.
Getting information on the purchase consideration for a deal like this can be difficult, especially if there are binding non-disclosure clauses in place. For example, when Zinnox purchased Konga from Naspers (another South African firm) and AB Kinnevik two years ago, the purchase consideration was never disclosed. This notwithstanding, we do know what Shoprite Nigeria is worth, at least on paper value.
What is it worth on paper? Going by the company’s most recent annual report published in June 2019, Shoprite values its equity in its Nigerian subsidiary at R 1.164 billion (1.1 billion rands). This translates to about N25.6 billion using the official exchange rate. This is also an equivalent of $67.7 million. The exchange rates are modest and will certainly be higher if the transaction was to be at this valuation.
However, the N25.6 billion price tag is only reflective of what Shoprite Nigeria’s operations is worth on paper. In other words, this is what accountants call the ‘book value’. It could be more or even less depending on how the negotiations eventually panes out.
Note, however, that Shoprite’s Nigeria business is its second-largest, based on book value and next only to Angola.
How will it be funded? The potential investors will likely fund this transaction via debt or equity or a combination of both. Deals like this also take time to be completed, even if an agreement is announced. Regulatory approvals would also be sought from the Securities and Exchange Commission of Nigeria and possibly that of South Africa.
We will keep you updated on this development as more information become available…