Billionaire Christo Wiese’s R59 billion blunder

Billionaire Christo Wiese lost R59 billion by trusting Markus Jooste, and he could have been wiped out entirely if it were not for a fortuitous event.

Wiese is one of South Africa’s most successful businessmen. He built numerous retail powerhouses, including Shoprite and Pepkor.

He is widely seen as a brilliant investor who can spot a bad deal at a distance. However, his judgment failed him with former Steinhoff CEO Markus Jooste.

In Neil Joubert’s book, Whitey: The Rise and Rule of the Shoprite King, Basson said Wiese had an irrational trust and fondness for Jooste and wanted to bet the farm on him.

He sold his Lanzerac wine estate to Jooste in exchange for Steinhoff shares, and also swapped a block of his PSG shares for more Steinhoff shares.

However, this was only the start. Wiese worked towards consolidating all his interests, including Shoprite and Pepkor, under Steinhoff.

In 2013, he became a Steinhoff director, and he became the largest shareholder and chairman after selling his company, Pepkor, to Steinhoff.

He further increased his stake to finance Steinhoff’s acquisition of Mattress Firm in the United States. By 2016, Wiese held about 23% of Steinhoff’s shares.

The next step in Wiese’s Steinhoff master plan was to merge Shoprite and Steinhoff, creating an African retail powerhouse under Jooste’s control.

Basson, who served as Shoprite’s chief executive for four decades, fiercely opposed the plan. He did not like Jooste and thought Steinhoff had many poor-quality businesses.

The idea that Steinhoff would control Shoprite and that he would report to Jooste did not sit well with Basson.

Over his tenure as Shoprite CEO, Wiese has never meddled in Shoprite’s management and left Basson to do as he saw fit. This was a winning formula.

If the Steinhoff deal went through, it would completely change this dynamic. It would break the relationship and put Shoprite at risk.

Basson addressed these concerns with Wiese and cautioned him about Steinhoff. “Swapping Shoprite shares for Steinhoff is like trading a champion horse for a donkey,” he said.

Wiese would not listen. The behind-the-scenes battles caused a rift between Bason and Wiese, which reached such concerning levels that Bason resigned.

He even warned Wiese: “I have never differed from you in public, but this time I will definitely do so. It would be the death knell for Shoprite.”

Despite Basson’s resistance and repeated warnings about Steinhoff and Joose, Wiese steamed ahead with the deal.

Wiese saved by the bell

On 14 December 2016, after Basson announced his retirement, Steinhoff and Shoprite announced that they had set out details of a proposed transaction.

The deal included Shoprite acquiring Steinhoff’s African retail operations. In exchange, Shoprite would issue new shares to Steinhoff.

This would have given Steinhoff an interest of nearly 40% in Shoprite, making it the largest and controlling shareholder.

However, in February 2017, Steinhoff and Shoprite announced that the deal was off as shareholders could not reach an agreement on the share exchange value.

Wiese did not give up. He took a second bite at the cherry, and in September 2017, Steinhoff listed its African retail operations on the JSE.

It announced that Wiese and other large shareholders would exchange their Shoprite shares for a stake in the new company, Steinhoff African Retail (STAR).

On 30 November 2017, Steinhoff African Retail announced that it would acquire a controlling stake in Shoprite.

However, in December 2017, Steinhoff disclosed accounting irregularities, which led to Jooste’s resignation and a dramatic collapse in its share price.

The Shoprite deal was dead, and Jooste became the poster child for corporate corruption. Very few people would touch Steinhoff afterwards.

Despite the Steinhoff collapse having wiped out R59 billion of his net wealth and Wiese losing his dollar billionaire status, he said it would have been much worse.

Wiese said he was lucky only to lose R59 billion. He explained that he could have lost everything if the Shoprite deal had gone through.

He admitted that he was wrong about the Steinhoff deal and Jooste and should have listened to Basson.