Johannesburg: Truworths International Ltd agreed to buy a majority stake in UK shoe chain Office Retail Group Ltd, the company’s first move into Europe and the latest in a string of international acquisitions by South African retailers.
The deal values Office at 256 million pounds ($385 million,Dh1.41 billion), with the management team reinvesting a portion of their sale proceeds and retaining an 11.1 per cent shareholding, Cape Town-based Truworths said in a statement on Monday. The South African company has the right to buy the stake in three to five years. The main seller is London-based private equity firm Silverfleet Capital.
“The acquisition enables the Truworths group to expand its operations, extend its product offering, benefit from currency diversification and balance its revenue between cash and credit sales,” Truworths said. Sales made on credit accounted for 70 per cent of the total in the year through June.
The deal adds to a list of overseas takeovers by South African companies this year, including the 780 million-pound acquisition of British fashion retailer New Look by investment company Brait SE and the purchase of UK clothing chain Phase Eight by retailer The Foschini Group Ltd. International expansion helps companies diversify their sources of revenue beyond the rand, which has weakened about 20 percent against the dollar this year.
Funding sources
Truworths will pay the acquisition amount and transaction costs with 3.6 billion rand ($250 million,Dh917.5 million) of cash from the South African business. Office’s existing debt will be refinanced through 80 million pounds of term loans and 5.9 million pounds of revolving UK credit facilities.
Truworths shares traded 0.2 per cent higher at 96.22 rand as of 11:56 am in Johannesburg, valuing the company at 41 billion rand. The stock has gained 25 per cent this year, compared with an 11 per cent gain on the FTSE/JSE Africa General Retailers Index.
The company expanded in Australia in 1994 with the purchase of clothes chain Sportsgirl Sportscraft, before putting it into liquidation five years later. Truworths, which sells mens and womens’ clothing ranging from office apparel to casual wear, has also been expanding its childrenswear offering in South Africa.
Office Retail’s net assets at January 25 were 60 million pounds, with sales of 270.2 million pounds. The deal is expected to be completed by no later than December 24, Truworths said.
The management shares will be valued at an agreed earnings multiple, with additional value accruing if certain performance targets are met, Truworths said.
