Foschini puts in offer to buy Jet from Edcon
The Foschini Group (TFG) says that it has submitted a conditional offer to Edcon to acquire selected Jet stores and related assets.
In a shareholder statement on Monday (13 July), TFG said that its aims to acquire these assets for a cash purchase consideration of R480 million.
TFG said that Edcon’s business rescue practitioners have accepted the terms of its conditional offer and that it has been granted exclusivity to negotiate and finalise the terms and conclude the proposed transaction.
“Jet is a leading Southern African retailer (by brand recognition and market share) and would provide TFG with a strategically important expansion into the value segment of the Southern African retail apparel market,” TFG said.
“The proposed transaction enables TFG to acquire selected parts of the JET business, a unique opportunity which previously was not possible and is expected to give TFG significant scale at an attractive price.
“The transaction construct provides TFG with structural risk mitigants, as detailed below, and establishes a value retail pillar for the TFG business that would be costly and difficult to replicate organically.”
Jet said that the proposed transaction will also include the transfer of selected key executives and staff of Jet to ensure sufficient management capacity and continuity to deliver on the current turnaround plan for the retailer.
TFG said that its conditional offer includes:
- The acquisition of the Jet brand;
- The assumption of a minimum of 371 commercially viable Jet stores. Included in this is a distribution centre located in Durban and certain stores in Botswana, Lesotho, Namibia and Eswatini;
- The acquisition of the associated property, plant and equipment for the commercially viable stores and the Durban distribution centre;
- The acquisition of the rights in and to the Jet Club;
- All existing stock holdings with a minimum stock value of no less than R800 million.
As part of the conditional offer, TFG will assume the operational commitments associated with the commercially viable stores only, such as employee and lease commitments, albeit on a renegotiated basis. Certain head office staff and functions will also be assumed.
TFG said it is finalising its assessment of the capital requirements of the business and currently does not believe this would result in a significant change in the capital requirements for the overall TFG Group.
Last week, Bloomberg reported that Edcon has also agreed to sell part of Edgars to a private-equity backed regional rival, safeguarding a 91-year-old brand and potentially saving thousands of jobs.
Administrators led by Lance Schapiro and Piers Marsden struck a deal with Retailability, a holding company for brands Legit, Beaver Canoe and Style, that owns 460 stores across southern Africa.
Details of the transaction will be finalized based on the signing of further agreements, the business-rescue team said in a statement on Tuesday.
Edcon was put into a local form of bankruptcy protection in late April, after a five-week strict lockdown to contain the coronavirus in South Africa wiped out sales and curtailed a recovery from a 2019 restructuring.
In a trading update on Monday, TFG said retail turnover for its Africa operation declined 38.4% for the three months ended 27 June 2020 when compared to the same period in the previous financial year, predominantly as a result of all South African operations being closed from 27 March 2020 to 30 April 2020.
It said that 80% of the stores re-opened from 1 May 2020, with all stores adhering to strict Covid-19 safety protocols.
Performance was strong in May and TFG Africa achieved retail turnover growth of 0.6% compared to the same period in the previous financial year, notwithstanding the fact that 447 jewellery stores were still closed during the month due to the prevailing lockdown restrictions.
Excluding the jewellery stores, retail turnover growth in May was up 7.9% compared to the previous financial year.
All TFG Africa stores re-opened from 1 June 2020 with trading more subdued in the month of June (retail turnover declined 13.8% compared to the same period in the previous financial year) with lower levels of footfall observed in the regional shopping centres, it said.
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