Steinhoff in bid for another UK group – second in two weeks

Steinhoff International Holdings is gaining a reputation as a disruptor of retail acquisitions in Europe after the opportunistic dealmaker said this week its furniture unit Conforama has made a bid for UK listed electronics chain Darty — a company that has already committed itself to another.

This comes after Steinhoff last week made a £1.4-billion bid for Argos, part of Home Retail Group in the UK, which was already in discussion with Sainsbury‘s.

“These household goods products fit in nicely with Steinhoff, and with the group‘s mentality at the moment - they‘re not stopping for anything,” said Byron Lotter, portfolio manager at Vestact Asset Management, who describes the group as aggressive dealmakers who can execute complex financially structured deals.

“They‘re dealmakers. They get their managers to run the businesses under the umbrella. Markus Jooste (Steinhoff‘s CEO) is not worrying about sales in a specific store. He‘s looking at the big picture and what they can push. They‘ve got a massive property portfolio mainly in Europe, a recent Frankfurt listing and they see lots of opportunities.”

Lotter added that Steinhoff already taking advantage of the Frankfurt listing to raise cheap money.

"The markets are pretty volatile at the moment - I get the feeling there are lots of opportunities, and lots of desperate sellers. They like to buy businesses like this that are possibly a bit behind the curve and improve them.”

Conforama‘s move this week could scupper the already agreed sale of Darty to France‘s Fnac, the French chain that sells music, books and electronics.

If the two deals go ahead it will help Steinhoff access better prices from suppliers as it will extend its footprint.

Argos had £4-billion of sales last year and Darty had £2.7-billion.

Conforama has 285 stores in Europe, primarily in France and Steinhoff could seek to combine Conforama‘s expertise in furnishings and Darty‘s strength in white-goods, TVs and other electrical goods, said the Financial Times. Darty generates 42% of its sales from white goods such as washing machines and fridges.

Steinhoff appears to be building a discount empire and is hugely cash generative. It brought in EUR 791-million from operations (after funding working capital) in its latest interim reporting period in the six months to December, up 75% from the previous period‘s EUR 451-million.

Steinhoff proposed to pay 125 pence a share in cash and the bid is 8.5% above Darty‘s closing price on Tuesday. Darty agreed on November 20 to sell itself to Fnac in a stock swap that valued it at about 122 pence a share.

The group‘s first-half profit rose 67%, expanding in the European and African discount markets in results released this week. Operating profit before capital items rose to EUR 802m for the six months to December.

The group‘s household goods segment, dominated by Conforama, is the biggest contributor to earnings. These increased by 8% to EUR 4.2-billion.

It was the group‘s first full period since the group bought Pepkor in April last year. First-half profit jumped 67% and operating profit before capital items rose to EUR 802-million. Sales jumped 47% to EUR 6.7-billion.