The Competition Commission has recommended that the Competition Tribunal approve retail giant Pepkor’s acquisition of hundreds of retail stores in South Africa, including Legit, Swagga, Style and Boardmans.

The brands are all under Retailablity, which is a privately owned retail group that offers affordable apparel and lifestyle products across several retail brands in South Africa, including Edgars.

The businesses to be acquired operate 462 stores across South Africa, Botswana, Lesotho, Namibia and Eswatini.

However, the Edgars, Edgars Beauty, Red Square, Kelso and Keedo businesses are not included in the transaction and will continue to be operated by Retailability.

According to the commission, Pepkor Holdings has four operating segments, but only two are relevant to the proposed transaction.

These are the clothing and general merchandise segments, including all clothing, footwear and homeware (CFH) retail brands under Pepkor Speciality and the furniture, appliances and electronics segment under Pepkor Lifestyle.

The Target Businesses’ activities in South Africa are as follows:

• Legit sells ladies’ fashion/apparel and various beauty products.
• Swagga consists of Swagga/Beaver Canoe stores that sell apparel for men and boys.
• Style sells men’s and women’s contemporary and formal fashion wear, as well as kids’ clothing and cellular products.
• Boardmans consists of an online-only store selling appliances and homeware products.

The commission said the proposed transaction is unlikely to substantially lessen or prevent competition in any market.

However, to address public interest concerns, Pepkor will employ the employees on terms and conditions that are no less favourable than the current employment terms and conditions.

In addition, the retail brands won’t retrench any employees because of the merger.

Lastly, Pepkor has also undertaken to maintain or increase the proportion of local procurement from small to medium enterprises (SMEs) and providers that are owned by historically disadvantaged persons (HDPs).

Scaling up

The acquisitions align with Pepkor’s strategy to scale up its operations in South Africa.

The group is already the largest clothing retailer in the country. It operates over 5,800 stores across 10 African countries.

The acquired businesses will be incorporated into the Pepkor Speciality business unit, which already houses Tekkie Town, Shoe City, Dunns, Refinery, CODE, SPCC and Ayana.

Pepkor’s Speciality total store base has 941 stores across South Africa, Botswana, Lesotho, Namibia and Eswatini.

Earlier this year, the group said the transaction will add scale to Pepkor Speciality and expand its product offering in the adult market, especially in womenswear through the Legit brand.

“The acquisition of Swagga and Style has strong synergistic benefits, expanding the group’s store
portfolio and providing the opportunity to further grow the group’s share in the adult wear market.”

“The Boardmans online brand, which operates in the homeware product segment, will become part of the Pepkor Lifestyle business,” said the group.

It was previously noted that the total purchase consideration payable on the closing of the sale will represent less than 2% of Pepkor’s R96 billion market cap.

The purchase consideration will be settled in cash, it said.

News Credits:- BUSINESS TECH