By Jeph Ajobaju, Chief Copy Editor
Persianas, a Nigerian property group, is expected to take over the operations of Shoprite in Nigeria after the completion of a bidding process during which Persianas is arranging debt to finalise the buyout.
Reuters first reported the news and the deal was confirmed by banking sources.
Persianas Properties emerged as the buyer after a bidding process to acquire Shoprite which controls 22 per cent of Nigeria’s formal retail but is returning to base in South Africa amid challenges and competition in Nigeria.
MBO Capital and KPMG advised Persianas, while FBNQuest is arranging debt.
Bloomberg also reported that the owners of Shoprite valued its sale at N30 billion; however, the deal between Persianas and Shoprite is undisclosed.
Persianas Group owns the Palms Shopping Mall in Lagos, which also contains a Shoprite outlet.
Nairametrics reported last week that the Federal Competition and Consumer Protection Council (FCCPC) said it was not aware of Shoprite exiting Nigeria but confirmed a pending application for a merger/acquisition involving the retailer.
Glory days
The Nigeria that Shoprite knew when they made entry through the launch of The Palms in December 2005 is a sharp contrast to its current condition, per Nairametrics.
Little formal retail competition, a stable currency and much higher GDP growth rates were core themes in Nigeria’s story about a decade ago. Shoprite’s business grew by over 10 per cent annually for 13 straight years in its Non-South African country operations where Nigeria played a major role.
Shoprite sat at the very heart of Nigeria’s retail boom which saw total retail space grow 10 times from 2005 to late 2017.
Despite the 13 years of strong growth to 2020, the combination of events that have occurred over the past three to five years was enough for the retailer to decide to call it quits by selling a stake in their Nigerian subsidiary to investors.
Why quitting?
Nigeria’s retail market faced a myriad of challenges following the recession in 2016 provoking a loss of confidence in the market as investors suspended large exciting retail projects and a handful of retailers quit the country altogether.
With a slowdown in retail developments, Shoprite, the go-to anchor tenant in Nigeria’s major malls, found it difficult to expand.
Segment sales growth in Nigeria since June 2019 have been unimpressive compared to Shoprite’s home market in South Africa, even though that economy has been in recession since the beginning of the year.
Xenophobic attacks in September 2019 saw 14 Nigerian malls with Shoprite as its anchor tenant looted and damaged. This worsened sales growth and led to a 59 per cent slash in weekly customer visits, according to the retailers’ 2019 results.
Two months after the protests, customer visits were still 14 per cent lower than the typical.
Although Shoprite’s recent performance decline is highly influenced by currency fluctuations, the group mentioned in their 2019 results presentation that they were taking immediate actions in reducing dollar-denominated rent, borrowings and curbing capital allocation for new stores and developments, proving these were also a struggle for the company.
How big is Shoprite in Nigeria?
Shoprite’s relevance in Nigeria’s retail is highly significant with its anchor presence in 25 malls controlling about 21.81 per cent of Nigeria’s total retail space.
Any shakeup with Shoprite has significant consequences for Nigeria’s retail industry. Before the entrance of other players, Shoprite dominated Nigerian retail centres, dictating lease terms due to its heavy traction.