Steinhoff to buy Pepkor for $5.7bn

South Africa-based Steinhoff, a furniture and household goods manufacturer and retailer, looks to increase its footprint in the discount market by purchasing a controlling stake in Pepkor for 62.8bn rand ($5.69bn).

Pepkor is a South African operator of retail stores in 16 countries. It was founded in 1965 and posted revenue of 38.2bn rand in fiscal 2014 ending June.

Steinhoff wants to own the company “to accelerate its expansion throughout Europe.” Pepkor operates a range of brands including Pepco, a discount clothing and everyday basics chain that has become Poland’s top non-food retailer. It also runs Pep, Africa’s largest retailer.

Steinhoff has already received support to acquire a 92.3 per cent controlling stake in the company. It will purchase a 52.5 per cent stake from Titan, a 37 per cent stake from Brait and a 2.8 per cent stake from Pepkor management.

Steinhoff has been listed in Johannesburg since 1998 but its operations outside of South Africa accounted for three-quarters of last year’s revenue. It said of Pepkor:

Pepkor is an attractive acquisition opportunity for Steinhoff given its strong market position, robust operating model, well executed multi-brand strategy, positioning for future growth opportunities and highly experienced management team.

… Customers across the spectrum are “trading down” as discount retailers have become more socially acceptable, offering improved variety and quality. In addition, discount retailers have expanded operations through rapid new store openings, thereby gaining market share from traditional retailers. This underlying consumer trend is expected to continue even after the anticipated economic recovery


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